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AUTOMATION, EMPLOYMENT,
AND PRODUCTIVITY
JANUARY 2017
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PREFACE
Automation is an idea that has inspired science fiction writers and futurologists for more than
a century. Today it is no longer fiction, as companies increasingly use robots on production
lines or algorithms to optimize their logistics, manage inventory, and carry out other core
business functions. Technological advances are creating a new automation age in which
ever-smarter and more flexible machines will be deployed on an ever-larger scale in the
workplace. In reality, the process of automating tasks done by humans has been under way
for centuries. What has perhaps changed is the pace and scope of what can be automated.
It is a prospect that raises more questions than it answers. How will automation transform
the workplace? What will be the implications for employment? And what is likely to be its
impact both on productivity in the global economy and on employment?
This report was produced as part of the McKinsey Global Institutes overall research on
the impact of technology on business and society, and specifically our ongoing research
program on the future of work and the potential impacts on the global economy of data and
analytics, automation, robotics and artificial intelligence. In this report, we analyze how a
wide range of technologies could potentially automate current work activities that people are
paid to do in the global workforce, and what the impact could be on global productivity. This
work does not define what the new activities and occupations that will be developed will
be, nor does it analyze in depth how the economic gains of automation will be distributed or
provide specific policy recommendations for governments. While we consider a broad range
of automation technologies, we do not focus specifically on any particular technologies.
We realize that this area of research is evolving rapidly, given the pace of technological
advancement, and we plan to update the perspectives presented in this report regularly.
The research was led by JamesManyika, a director of the McKinsey Global Institute
and McKinsey senior partner based in San Francisco; MichaelChui, an MGI partner in
San Francisco; and MehdiMiremadi, a McKinsey partner based in Chicago. MGI and
McKinsey senior partner JacquesBughin and McKinsey senior partners MartinDewhurst,
KatyGeorge, AndrewGrant, BillSchaninger, StefanSpang, and PaulWillmott guided
and contributed to the research. We would especially like to acknowledge the work
of SeanKane, RickCavolo, and TongChen, who each headed the research team at
different times over the course of the two-year project and who played invaluable roles
in coordinating and driving it forward. The team comprised AnujAbrol, JaredBarnett,
JacksonBeard, LilyCheng, JoshCogan, ArielleCopeland, SamDoniger, RachelGarber,
PaulGilson, BobGlied, SartajGrover, GauriGupta, BenjaminHarrison, AlexHinch,
TanayJuipuria, DanielLanger, KunalMehta, AndreyMironenko, VaishalPatel, StevenPecht,
JonathanSands, SanthoshSuresh, AdamTourgee, RoshinUnnikrishnan, JeanXin,
RogerYang, GordonYu, and VickiYu.
We are grateful to colleagues within McKinsey who provided valuable advice and analytical
support: JonathanAblett, PraveenAdhi, AdrianaAragon, MandarPAtre, GretchenBerlin,
DilipBhattacharjee, UrsBinggeli, BedeBroome, AndersBrun, JamieChang,
ZinaidaCherevan, AriChester, JeffreyCondon, SebasCordero, SubbiReddyDwarampudi,
AlanFitzgerald, ChristopherForr-Rydgren, DanielGarnier, PancoGeorgiev, TimoGlave,
DavideGronchi, SaifHameed, HolgerHurtgen, AndrewJordan, JoshuaKatz, RichardKelly,
AimeeKim, SajalKohli, PaulKolter, MichelleLin, JoyLong, MurdockMartin, AnneMartinelli,
Jacques Bughin
Director, McKinsey Global Institute
Senior Partner, McKinsey & Company
Brussels
James Manyika
Director, McKinsey Global Institute
Senior Partner, McKinsey & Company
San Francisco
Jonathan Woetzel
Director, McKinsey Global Institute
Senior Partner, McKinsey & Company
Shanghai
January 2017
CONTENTS
In brief
HIGHLIGHTS
23
Technology is advancing
rapidly
Automation technologies including robotics and artificial intelligence have advanced rapidly,
but some key hurdles still need to be cleared
2. The technical potential forautomation Page 29
Almost half of the work activities in all sectors across the economy have the potential to be
automated by adapting currently demonstrated technologies
114
3. Five case studies Page 53
How automation could potentially transform hospital emergency departments, aircraft
maintenance, mortgage brokering, oil and gas control rooms, and grocery stores
Humans will interact more
with machines
IN BRIEF
69%
Collecting data
64%
Remaining
countries
Share of roles
100% = 820 roles
2.7
5.1
100% =
$15.8T
100
91
1.1
India
73
1.1
Japan
62
<5% of occupations consist
of activities that are
100% automatable
26
18
100
1.7
51
42
34
Remaining
countries 332
100% =
>90
>80
>70
>60
>50
>40
>30
China
Big 5 in Europe1
4.1
>20
>10
>0
Japan
Big 5 in Europe1
35
54
China
1.1B
60
233
United States
394
India
TECHNICAL
FEASIBILITY
Technology
has to be
invented,
integrated,
and adapted
into solutions
for specific
case use
COST OF
DEVELOPING
AND
DEPLOYING
SOLUTIONS
Hardware
and software
costs
LABOR
MARKET
DYNAMICS
The supply,
demand, and
costs of
human labor
affect which
activities will
be automated
ECONOMIC
BENEFITS
Include higher
throughput
and increased
quality,
alongside
labor cost
savings
REGULATORY
AND SOCIAL
ACCEPTANCE
Even when
automation
makes
business
sense,
adoption can
take time
Productivity growth, %
Automation can help provide some of the productivity needed
to achieve future economic growth
Employment growth, %
will slow drastically because of aging
Next 50 years
Potential impact of automation
Adoption,
Late scenario
Technical automation
potential, Early scenario
100
Technical
automation
potential
must precede
adoption
80
60
40
20
0
Technical automation
potential, Late scenario
2020
2030
2040
2050
2060 2065
Technical,
economic,
and social
factors affect
pace of
adoption
1.8
2.8
1.4
1.7
3.5
Historical
0.1
2.9
Required to
achieve
projected growth
in GDP per capita
0.8
0.1
1.5
0.1
0.9
Early
scenario
Late
scenario
Starship Technologies
viii
EXECUTIVE SUMMARY
Automation is not a new phenomenon, and questions about its promise and effects have
long accompanied its advances. More than a half century ago, US President Lyndon B.
Johnson established a national commission to examine the impact of technology on the
economy and employment, declaring that automation did not have to destroy jobs but can
be the ally of our prosperity if we will just look ahead.1 Many of the same questions have
come to the fore again today, as a result of remarkable recent advances in technologies
including robotics, artificial intelligence (AI), and machine learning. Automation now has
the potential to change the daily work activities of everyone, from miners and landscape
gardeners to commercial bankers, fashion designers, weldersand CEOs. But how quickly
will these technologies become a reality in the workplace? And what will their impact be on
employment and on productivity in the global economy?
Over the past two years, we have been conducting a research program on automation
technologies and their potential effects. Some of our key findings include the following.
We are living in a new automation age in which robots and computers can not only
perform a range of routine physical work activities better and more cheaply than
humans, but are also increasingly capable of accomplishing activities that include
cognitive capabilities. These include making tacit judgments, sensing emotion, or even
drivingactivities that used to be considered too difficult to automate successfully.2
The automation of activities can enable productivity growth and other benefits at both
the level of individual process and businesses, as well as at the level of entire economies,
where productivity acceleration is sorely needed, especially as the share of the workingage population declines in many countries. At a microeconomic level, businesses
everywhere will have an opportunity to capture benefits and achieve competitive
advantage from automation technologies, not just from labor cost reductions, but also
from performance benefits such as increased throughput, higher quality, and decreased
downtime. At a macroeconomic level, based on our scenario modeling, we estimate
automation could raise productivity growth on a global basis by as much as 0.8 to
1.4percent annually.
Our approach to analyzing the potential impact of automation is through a focus on
individual activities rather than entire occupations. Given currently demonstrated
technologies, very few occupationsless than 5percentare candidates for full
automation today, meaning that every activity constituting these occupations is
automated. However, almost every occupation has partial automation potential, as a
significant percentage of its activities could be automated. We estimate that about half
of all the activities people are paid to do in the worlds workforce could potentially be
automated by adapting currently demonstrated technologies.
President Johnson signed the bill creating the National Commission on Technology, Automation, and
Economic Progress, on August 19, 1964. The report was published in 1966. Technology and the American
economy: Report of the National Commission on Technology, Automation and Economic Progress, US
Department of Health, Education and Welfare, February 1966. In December 2016, the White House released
a new report on the same subject, Artificial intelligence, automation, and the economy.
2
In this report we focus on the implications of automation technologies rather than on the technologies
themselves. For a more detailed discussion of machine learning and deep learning technologies see the
corresponding chapter in The age of analytics: Competing in a data-driven world, McKinsey Global Institute,
December 2016.
1
The pace and extent of automation, and thus its impact on workers, will vary across
different activities, occupations, and wage and skill levels. Many workers will continue
to work alongside machines as various activities are automated. Activities that are likely
to be automated earlier include predictable physical activities, especially prevalent in
manufacturing and retail trade, as well as collecting and processing data, which are
activities that exist across the entire spectrum of sectors, skills and wages. Some forms
of automation will be skill-biased, tending to raise the productivity of high-skill workers
even as they reduce the demand for lower-skill and routine-intensive occupations, such
as filing clerks or assembly-line workers.3 Other automation has disproportionately
affected middle-skill workers.4 As technology development makes the activities of both
low-skill and high-skill workers more susceptible to automation, these polarization
effects could be reduced.
Automation will have wide-ranging effects, across geographies and sectors. Although
automation is a global phenomenon, four economiesChina, India, Japan, and the
United Statesaccount for just over half of the total wages and almost two-thirds the
number of employees associated with activities that are technically automatable by
adapting currently demonstrated technologies. Within countries, automation potential
will be affected by their sector mix, and the mix of activities within sectors. For example,
industries such as manufacturing and agriculture include predictable physical activities
that have a high technical potential to be automated, but lower wage rates in some
developing countries could constrain adoption.
Automation will not happen overnight, and five key factors will influence the pace
and extent of its adoption. First is technical feasibility, since the technology has to be
invented, integrated and adapted into solutions that automate specific activities. Second
is the cost of developing and deploying solutions, which affects the business case for
adoption. Third are labor market dynamics, including the supply, demand, and costs of
human labor as an alternative to automation. Fourth are economic benefits, which could
include higher throughput and increased quality, as well as labor cost savings. Finally,
regulatory and social acceptance can affect the rate of adoption even when deployment
makes business sense. Taking all of these factors into account, we estimate it will take
decades for automations effect on current work activities to play out fully. While the
effects of automation might be slow at a macro level within entire sectors or economies,
they could be quite fast at a micro level, for an individual worker whose activities are
automated, or a company whose industry is disrupted by competitors using automation.
While much of the current debate about automation has focused on the potential for
mass unemployment, predicated on a surplus of human labor, the worlds economy will
actually need every erg of human labor working, in addition to the robots, to overcome
demographic aging trends in both developed and developing economies. In other
words, a surplus of human labor is much less likely to occur than a deficit of human
labor, unless automation is deployed widely. However, the nature of work will change. As
processes are transformed by the automation of individual activities, people will perform
activities that are complementary to the work that machines do (and vice versa). These
shifts will change the organization of companies, the structure and bases of competition
of industries, and business models.
For a discussion of skill-biased and unskill-biased technical change see David H. Autor, Frank Levy, and
Richard J. Murnane, The skill content of recent technological change: An empirical explanation, Quarterly
Journal of Economics, November 2003, and Daron Acemoglu and David H. Autor, Skills, tasks, and
technologies: Implications for employment and earnings, in Handbook of Labor Economics, volume 4B,
David Card and Orley Ashenfelter, eds., Elsevier, 2011.
4
David H. Autor, Why are there still so many jobs? The history and future of workplace automation, Journal of
Economic Perspectives, volume 29, number 3, 2015.
3
Executive summary
For business, the performance benefits of automation are relatively clear, but the issues
are more complicated for policy makers. They should embrace the opportunity for their
economies to benefit from the productivity growth potential and put in place policies
to encourage investment and market incentives to encourage continued progress and
innovation. At the same time, they must evolve and innovate policies that help workers
and institutions adapt to the impact on employment. This will likely include rethinking
education and training, income support, and safety nets, as well as transition support for
those dislocated. Individuals in the workplace will need to engage more comprehensively
with machines as part of their everyday activities, and acquire new skills that will be in
demand in the new automation age.
The scale of shifts in the labor force over many decades that automation technologies can
unleash is of a similar order of magnitude to the long-term technology-enabled shifts in the
developed countries workforces away from agriculture in the 20th century. Those shifts
did not result in long-term mass unemployment because they were accompanied by the
creation of new types of work not foreseen at the time. We cannot definitively say whether
historical precedent will be upheld this time. But our analysis shows that humans will still
be needed in the workforce: the total productivity gains we estimate will come about only if
people work alongside machines.
The word robot comes from the Slavic word for work, robota. Karel Capek, R.U.R. (Rossums Universal
Robots), 1920. The play is available at www.gutenberg.org.
6
Steven Rosenbush and Laura Stevens, At UPS, the algorithm is the driver, Wall Street Journal, February
16, 2015. Amazon employees can pick and pack three times as many products per hour with the help of
robots. Eugene Kim, Amazon is now using a whole lot more of the robots from the company it bought for
$775million, Business Insider, October 22, 2015; Kim Bhasin and Patrick Clark, How Amazon triggered a
robot arms race, Bloomberg, June 29, 2016.
7
Hal Hodson, Googles DeepMind AI can lip-read TV shows better than a pro, New Scientist, November
21, 2016.
5
BoxE1. How we established the technical automation potential of the global economy
To assess the technical automation potential of the global
This analysis enabled us to estimate the technical
economy, we used a disaggregation of occupations into
automation potential of more than 2,000 work activities in
constituent activities that people are paid to do in the
more than 800 occupations across the economy, based
global workplace. Each of these activities requires some
on data from the US Department of Labor. By estimating
combination of 18 performance capabilities, which we list
the amount of time spent on each of these work activities,
in ExhibitE1. They are in five groups: sensory perception,
we were able to estimate the automation potential of
cognitive capabilities, natural language processing, social
occupations in sectors across the economy, comparing
and emotional capabilities, and physical capabilities.
them with hourly wage levels. Drawing on industry
experts, we also developed scenarios for how rapidly the
We estimated the level of performance for each of these
performance of automation technologies could improve in
capabilities that is required to perform each work activity
each of these capabilities.
successfully, based on the way humans currently perform
activitiesthat is, whether the capability is required at
The analysis we conducted for the United States provided
all, and if so, whether the required level of performance
us with a template for estimating the automation potential
was at roughly a median human level, below median
and creating adoption timing scenarios for 45 other
human level, or at a high human level of performance
economies representing about 80percent of the global
(for example, top 25th percentile). We then assessed the
workforce. For details of our methodology, see the
performance of existing technologies today based on the
technical appendix.
same criteria.
Exhibit E1
To assess the technical potential of automation, we structure our analysis around 2,000 distinct work activities
Occupations
Activities
Capability requirements
Sensory perception
Sensory perception
Greet customers
Retail
salespeople
Answer questions
about products
and services
Food and
beverage service
workers
Clean and
maintain
work areas
Teachers
Demonstrate
product features
Health
practitioners
~800 occupations
~2,000 activities
assessed across all
occupations
Executive summary
Cognitive capabilities
Retrieving information
Recognizing known patterns/categories (supervised learning)
Generating novel patterns/categories
Logical reasoning/problem solving
Optimizing and planning
Creativity
Articulating/display output
Coordination with multiple agents
Natural language processing
Natural language generation
Natural language understanding
Social and emotional capabilities
Social and emotional sensing
Social and emotional reasoning
Emotional and social output
Physical capabilities
Fine motor skills/dexterity
Gross motor skills
Navigation
Mobility
Exhibit E2
While few occupations are fully automatable, 60 percent of all occupations have at least 30 percent technically
automatable activities
Automation potential based on demonstrated technology of occupation titles in the United States (cumulative)1
Share of roles (%)
100% = 820 roles
Example occupations
100
>90
Chemical technicians,
nursing assistants,
Web developers
>80
>70
>60
>50
26
34
42
>40
>30
>20
51
62
73
>10
Psychiatrists, legislators
91
>0
100
1 We define automation potential according to the work activities that can be automated by adapting currently demonstrated technology.
SOURCE: US Bureau of Labor Statistics; McKinsey Global Institute analysis
Most recent studies estimating the impact of automation in the workplace focus on occupations. See
Carl Benedikt Frey and Michael A. Osborne, The future of employment: How susceptible are jobs to
computerisation? Oxford Martin School, September 17, 2013; The future of jobs: Employment, skills, and
workforce strategy for the fourth Industrial Revolution, World Economic Forum, January 2016.
REPEATS in report
McKinsey Global Institute
Exhibit E3
Three categories of work activities have significantly higher technical automation potential
Time spent on activities that can be automated by adapting currently demonstrated technology
%
81
69
64
Time spent
in all US
occupations
%
Total wages
in US, 2014
$ billion
20
14
16
12
17
16
18
Interface3
Unpredictable
physical4
Collect
data
Process
data
Predictable
physical5
896
504
1,030
931
766
Manage1 Expertise2
596
26
18
1,190
Most
susceptible
activities
51%
of total
working hours
$2.7 trillion
in wages
REPEATS
An interactive mapping of the automation potential of multiple sectors of the economy is available online at
http://public.tableau.com/profile/mckinsey.analytics#!/
Executive summary
Exhibit E4
Technical potential for automation across sectors varies depending on mix of activity types
Size of bubble indicates % of
time spent in US occupations
Sectors by
activity type
Manage Expertise
Interface
Unpredictable
Collect
physical
data
Process
data
Predictable
physical
50
100
Automation potential
%
Accommodation
and food services
73
Manufacturing
60
Agriculture
58
Transportation and
warehousing
57
53
Retail trade
51
Mining
Other services
49
Construction
47
Utilities
44
Wholesale trade
44
Finance and
insurance
43
Arts, entertainment,
and recreation
41
Real estate
40
Administrative
39
36
Information
36
Professionals
35
Management
35
Educational
services
27
The data visualization can be found on the McKinsey Global Institute public site at tableau.com:
http://public.tableau.com/profile/mckinsey.analytics#!/
10
Executive summary
Exhibit E5
The technical automation potential of the global economy is significant, although there is some variation
among countries
Employee weighted overall % of activities that can be automated
by adapting currently demonstrated technologies1
<45
>51
No data
Technical automation potential is concentrated in countries with the largest populations and/or high wages
Potential impact due to automation, adapting currently demonstrated technology (46 countries)
Wages associated with
technically automatable activities
$ trillion
Automation potential
%
Japan
United
States
Remaining
countries
55
Remaining
countries
2.7
5.1
100% =
$15.8 trillion
4.1
1.1
India
1.1
Japan
1.7
Europe Big 52
China
India
332
100% =
1,109 million
FTEs
35
Japan 54
60
Europe Big 52
United States
394
China
233
India
52
China
51
United States
46
Europe Big 52
46
Rest of world
50
1 Pakistan, Bangladesh, Vietnam, and Iran are largest countries by population not included.
2 France, Germany, Italy, Spain, and the United Kingdom.
NOTE: Numbers may not sum due to rounding.
SOURCE: Oxford Economic Forecasts; Emsi database; US Bureau of Labor Statistics; McKinsey Global Institute analysis
10
Executive summary
11
Regulatory and social acceptance. Even when deploying automation makes business
sense, the rate of adoption can be affected by contextual factors such as regulatory
approval and the reaction of users. There are multiple reasons that technology adoption
does not happen overnight. The shift of capital investment into these new technologies
takes time (in aggregate), as does changing organizational processes and practices
to adapt to new technologies. Reconfiguring supply chains and ecosystems can be
laborious, and regulations sometimes need to change. Government policy can slow
adoption, and different businesses adopt technologies at different rates. Changing the
activities that workers do also requires dedicated effort, even if they are not actively
resisting. And especially in the case of automation, individuals may feel uncomfortable
about a new world where machines replace human interaction in some intimate life
settings, such as a hospital, or in places where machines are expected to make life-anddeath decisions, such as when driving.
11
12
Stanley Lebergott, Labor force and employment 18001960, in Output, employment, and productivity in
the United States after 1800, Dorothy S. Brady, ed., NBER, 1966; World Bank data; Mack Ott, The growing
share of services in the US economydegeneration or evolution? Federal Reserve Bank of St. Louis Review,
June/July 1987.
Executive summary
Exhibit E6
Automation will be a global force, but adoption will take decades and there is significant uncertainty on timing
Time spent on current work activities1
%
Adoption
Early scenario
Late scenario
Technical automation
potential
Early scenario
Late scenario
100
90
80
70
60
50
40
30
20
10
0
2016 20
25
30
35
40
45
50
60
55
65
70
75
80
85
90
95
2100
1 Forty-six countries used in this calculation, representing about 80% of global labor force.
SOURCE: McKinsey Global Institute analysis
Exhibit E7
REPEATS in report
Employment in agriculture has fallen from 40 percent in 1900 to less than 2 percent today
Distribution of labor share by sector in the United States, 18402010
%
90
80
70
60
50
40
30
20
Manufacturing
10
0
1840 50
Agriculture
60
70
80
90 1900 10
20
30
40
50
60
70
80
90 2000 2010
SOURCE: Stanley Lebergott, Labor force and employment 18001960, in Output, employment, and productivity in the United States after 1800, Dorothy S.
Brady, ed., NBER, 1966; World Data Bank, World Bank Group; FRED: Economic Research, Federal Reserve Bank of St. Louis; Mack Ott, The
growing share of services in the US economydegeneration or evolution? Federal Reserve Bank of St. Louis Review, June/July 1987; McKinsey
Global Institute analysis
REPEATS in report
McKinsey Global Institute
13
By costs in this case, we mean wages plus benefits, calculated globally on a purchasing power parity basis.
Some of the technologies we modeled have not likely yet reached their eventual peak in adoption.
14
There has been a proliferation of books by competing schools of techno-optimists and techno-pessimists.
They notably include Erik Brynjolfsson and Andrew McAfee, The second machine age: Work, progress, and
prosperity in a time of brilliant technologies, W. W. Norton & Company, 2014; Robert Gordon, The rise and
fall of American growth: The US standard of living since the Civil War, Princeton University Press, 2016; and
Martin Ford, Rise of the robots: Technology and the threat of a jobless future, Basic Books, 2015. Also Jason
Furman, Is this time different? The opportunities and challenges of artificial intelligence, remarks at AI Now:
The Social and Economic Implications of Artificial Intelligence Technologies in the Near Term conference in
New York, July 7, 2016.
15
For a discussion of the polarization of the labor market, see David H. Autor and David Dorn, The growth of
low-skill service jobs and the polarization of the US labor market, American Economic Review, volume 103,
number 5, August 2013.
16
For example, a study conducted by McKinsey & Companys French office in 2011 showed that for every job
that had been lost in France as the result of the advent of the internet in the previous 15years, 2.4 new jobs
had been created. Impact dinternet sur lconomie franaise: Comment internet transforme notre pays
(The internets impact on the French economy: How the internet is transforming our country), McKinsey &
Company, March 2011.
12
13
14
Executive summary
three million do so voluntarily. Most of these people are not unemployed for long periods as
they move on to other jobs.17
That said, automation also represents a very substantial opportunity to support global
economic growth. Our estimates suggest it has the potential to contribute meaningfully to
the growth necessary to meet the per capita GDP aspirations of every country, at a time
when changing demographics call those aspirations into question. Indeed, for this growth to
take place, rather than having a massive labor surplus, everyone needs to keep working
with the robots working alongside them.
Automation can help close a GDP growth gap resulting from declining growth
rates of working-age populations
GDP growth was brisk over the past half century, driven by the twin engines of employment
growth and rising productivity, both contributing approximately the same amount. However,
declining birthrates and the trend toward aging in many advanced and some emerging
economies mean that peak employment will occur in most countries within 50years.18 The
expected decline in the share of the working-age population will open an economic growth
gap: roughly half of the sources of economic growth from the past half century (employment
growth) will evaporate as populations age. Even at historical rates of productivity growth,
economic growth could be nearly halved.
Automation could compensate for at least some of these demographic trends. We estimate
the productivity injection it could give to the global economy as being between 0.8 and
1.4percent of global GDP annually, assuming that human labor replaced by automation
would rejoin the workforce and be as productive as it was in 2014. Considering the labor
substitution effect alone, we calculate that, by 2065, automation could potentially add
productivity growth in the largest economies in the world (G19 plus Nigeria) that is the
equivalent of an additional 1.1billion to 2.3billion full-time workers (ExhibitE8).
The productivity growth enabled by automation can ensure continued prosperity in aging
nations and provide an additional boost to fast-growing ones. Automation on its own will not
be sufficient to achieve long-term economic growth aspirations across the world; for that,
additional productivity-boosting measures will be needed, including reworking business
processes or developing new products and services.
US Bureau of Labor Statistics job openings and labor turnover survey database.
Global growth: Can productivity save the day in an aging world? McKinsey Global Institute, January 2015.
Our estimate of employment growths contribution to GDP growth in this report differs slightly from this earlier
research, as we have assumed productivity measured in each country, rather than a global average.
17
18
15
the growth of their working population.19 For these economies, automation can provide
the productivity injection needed just to maintain current GDP per capita. To achieve a
faster growth trajectory that is more commensurate with their developmental aspirations,
these countries would need to supplement automation with additional sources of
productivity, such as process transformations, and would benefit from more rapid
adoption of automation.
Emerging economies with younger populations. These include India, Indonesia, Mexico,
Nigeria, Saudi Arabia, South Africa, and Turkey.20 The continued growth of the workingage population in these countries could support maintaining current GDP per capita.
However, given their high growth aspirations, automation plus additional productivityraising measures will be necessary to sustain their economic development.
Exhibit E8
Globally, automation could become a significant economic growth engine as employment growth wanes
GDP growth for G19 and Nigeria
Compound annual growth rate
%
Historical
19642014
Future
201565
3.5
2.9
Productivity
growth
1.8
2.8
Employment
growth
1.7
1.4
0.2
0.1
1.5
0.9
0.8
0.1
0.1
0.1
0.1
Historical
Required to
maintain current
GDP per capita
Required to
Early scenario
Late scenario
achieve projected
Potential impact of automation
GDP per capita
2.1
2.5
0.1
6.7
0.51.1
The demographic trends are pronounced for China and Russia, while Argentinas future workforce gap is
less certain.
20
The populations of Saudi Arabia and Turkey are projected to grow strongly over the next 20years, but
slow thereafter.
19
REPEATS in report
16
Executive summary
The advances in automation and their potential impact on national economies could upend
some prevailing models of development and challenge ideas about globalization. Countries
experiencing population declines or stagnation will be able to maintain living standards
even as the labor force wanes. Meanwhile, countries with high birthrates and a significant
growth in the working-age population may have to worry more about generating new jobs
in a new age of automation. Moreover, low-cost labor may lose some of its edge as an
essential developmental tool for emerging economies, as automation drives down the cost
of manufacturing globally.
We explore several case studies of the potential transformations of business processes in Chapter 3.
21
17
Workers will need to work more closely with technology, freeing up more time
to focus on intrinsically human capabilities that machines cannot yet match
Men and women in the workplace will need to engage more comprehensively with
machines as part of their everyday activities. Tighter integration with technology will free up
time for human workers including managers to focus more fully on activities to which they
bring skills that machines have yet to master. This could make work more complex, and
harder to organize, with managers spending more time on coaching.26
As people make education and career choices, it will be important for them to be made
aware of the factors driving automation in particular sectors, to help them identify the skills
Jason Furman, Is this time different? The opportunities and challenges of artificial intelligence, remarks at AI
Now: The Social and Economic Implications of Artificial Intelligence Technologies in the Near Term conference
in New York, July 7, 2016.
23
Tim OReilly, Dont replace people. Augment them, Medium.com, July 17, 2016.
24
The age of analytics: Competing in a data-driven world, McKinsey Global Institute in collaboration with
McKinsey Analytics, December 2016.
25
Poorer than their parents? Flat or falling incomes in advanced economies, McKinsey Global Institute,
July 2016.
26
Daron Acemoglu and Pascual Restrepo, The race between machines and humans: Implications for growth,
factor shares and jobs, Vox, July 5, 2016.
22
18
Executive summary
that could be useful for them to acquire from a labor-market perspective, and what activities
will be complements of activities that are likely to be automated.27
High-skill workers who work closely with technology will likely be in strong demand, and
may be able to take advantage of new opportunities for independent work as the corporate
landscape shifts and project work is outsourced by companies. Middle-skill workers whose
activities have the highest technical potential for automation (predictable physical activities,
collecting and analyzing data) can seek opportunities for retraining to prepare for shifts
in their activities toward those that are complements of activities the machines will start
to perform.
Low-skill workers working with technology will be able to achieve more in terms of output
and productivity but may experience wage pressure given the potentially large supply of
similarly low-skill workers.
Education systems will need to evolve for a changed workplace, with policy makers working
with education providers to improve basic skills in the STEM fields of science, technology,
engineering, and mathematics, and put a new emphasis on creativity, as well as on critical
and systems thinking. For all, developing agility, resilience, and flexibility will be important at
a time when everybodys job is likely to change to some degree.
Finally, automation will create an opportunity for those in work to make use of the innate
human skills that machines have the hardest time replicating: logical thinking and problem
solving, social and emotional capabilities, providing expertise, coaching and developing
others, and creativity. For now, the world of work still expects men and women to undertake
rote tasks that do not stretch these innate capabilities as far as they could. As machines take
on ever more of the predictable activities of the workday, these skills will be at a premium.
Automation could make us all more human.
Automation will play an essential role in providing at least some of the productivity boost that
the global economy needs over the next half century as growth in working-age populations
declines. It will contribute meaningfully to GDP per capita growth, even if it will not on its
own enable emerging economies to meet their fast-growth aspirations. Given the range
of scenarios around the pace and extent of adoption of automation technologies, there
are sure to be surprises. We will see large-scale shifts in workplace activities over the next
century. These trends are already under way. Policy makers, business leaders, and workers
themselves must not wait to take action: already today, there are measures that can be
taken to prepare, so that the global economy can capture the opportunities offered by
automation, even as it avoids the drawbacks.
Erik Brynjolfsson and Andrew McAfee, The second machine age: Work, progress, and prosperity in a time of
brilliant technologies, W. W. Norton & Company, 2014.
27
19
20
Executive summary
Exhibit
E9
Carl Benedikt
Frey
and Michael A.
Osborne
Citibank with
Frey and Osborne
OECD
World Economic
Forum
McKinsey Global
Institute
January 2016
June 2016
January 2016
January 2017
Jobs/occupations
Tasks
Not applicable
Work activities
21 OECD countries
15 major developed
and emerging
economies
46 countries
representing about 80%
of global labor force
Estimates of
automatibility of tasks
were developed
based on matching of
the automatibility
indicators by FreyOsborne and the
PIAAC data
occupational codes,
followed by a twostep, tailored
regression analysis
Analysis of large-scale
survey of major global
employers, including
100 largest global
employers in each of
WEF main industry
sectors, to estimate
the expected level of
changes in job
families between
201520 and
extrapolate number of
jobs gained/lost
Disaggregation of
occupations into 2,000
constituent activities and
rating each against
human performance in
18 capabilities. Further
analysis of time spent
on each activity and
hourly wage levels.
Scenarios for
development and
adoption of automation
technologies
Date
September 2013
Unit of analysis
Jobs/occupations
Scope
US labor market
Approach summary
Analysis of 702
occupations (70 handlabeled working with
ML researchers,
followed by a tailored
Gaussian process
classifier to estimate
others and confirm
hand-labels) to
approximate the
impact of future
computerization on
the US labor market
Key relevant findings
Building on Frey
About 47% of total
and Osborne's
US occupations are
original work, data
at high risk of
from the World
automation perhaps
Bank suggests the
over the next
risks are higher in
decade or two
Wages and
many other
educational
countries; in the
attainment show a
OECD, on average
strong negative
57% of jobs are
relationship with
susceptible to
probability of
automation. This
computerization
number rises to
69% in India and
77% in China
SOURCE: Carl Benedikt Frey and Michael A. Osborne, The future of employment: How susceptible are jobs to computerisation?, Oxford Martin School,
September 17, 2013; Technology at Work v2.0: The future is not what it used to be, Citibank, January 2016; The future of jobs: Employment, skills,
and workforce strategy for the fourth Industrial Revolution, World Economic Forum, January 2016; Melanie Arntz, Terry Gregory, and Ulrich Zierahn,
The risk of automation for jobs in OECD countries: A comparative analysis, OECD Social, Employment and Migration working paper number 189,
OECD, May 2016; McKinsey Global Institute analysis. See also Holger Bonin, Terry Gregory, and Ulrich Zierahn, Ubertragung der Studie von
Frey/Osborne: (2013) auf Deutschland, Forschungsbericht 455, Bundesministerium fr Arbeit und Soziales, April 14, 2015; and Jeremy Bowles, The
computerisation of European jobs, Bruegel, July 24, 2014.
21
Executive summary
Exhibit 1
Glossary of automation technologies and techniques
JANUARY 2017
This list is not comprehensive but is meant to illustrate some of the technologies and techniques
that are being developed to enable automation of different work activities
Technologies
and techniques
Artificial
intelligence
Description/examples
Field of computer science specializing in developing systems that exhibit intelligence. Often
abbreviated as AI, the term was coined by John McCarthy at the Dartmouth Conference in 1956, the
first conference devoted to this topic
Machine
learning
Supervised
learning
Transfer
learning
Subfield of machine learning developing systems that store knowledge gained while
solving one problem and applying it to a different but related problem. Often used
when the training set for one problem is small, but the training data for a related
problem is plentiful, e.g., repurposing a deep learning system trained on a large nonmedical image data set to recognize tumors in radiology scans
Reinforcement
learning
Subfield of machine learning developing systems that are trained by receiving virtual
rewards or punishments for behaviors rather than supervised learning on correct
input-output pairs. In February 2015, DeepMind described a reinforcement learning
system that learned how to play a variety of Atari computer games. In March 2016,
DeepMinds AlphaGo system defeated the world champion in the game of Go
Cognitive
computing
AI systems based on simulating connected neural units, loosely modeling the way
that neurons interact in the brain. Computational models inspired by neural
connections have been studied since the 1940s
Deep
learning
Use of neural networks that have many layers (deep) of a large number (millions) of
artificial neurons. Prior to deep learning, artificial neural networks often only had three
layers and dozens of neurons; deep learning networks often have seven to ten or more
layers. The term was first used in 2000
Convolutional neural
network
Artificial neural networks in which the connections between neural layers are inspired
by the organization of the animal visual cortex, the portion of the brain that processes
images, well suited for perceptual tasks. In 2012, the only entry using a convolutional
neural network achieved an 84% correct score in the ImageNet visual recognition
contest, vs. a winning score of 75% the year prior. Since then, convolutional neural
networks have won all subsequent ImageNet contests, exceeding human performance
in 2015, above 90%
Recurrent
neural
network
Artificial neural networks whose connections between neurons include loops, wellsuited for processing sequences of inputs. In November 2016, Oxford University
researchers reported that a system based on recurrent neural networks (and
convolutional neural networks) had achieved 95% accuracy in reading lips,
outperforming experienced human lip readers, who tested at 52% accuracy.
SOURCE: John McCarthy et al, A proposal for the Dartmouth summer research project on artificial intelligence, August 31, 1955, AI Magazine, volume 27,
number 4, 2016; Hayit Greenspan, Bram van Ginneken, and Ronald M. Summers, Deep learning in medical imaging: Overview and future promise
of an exciting new technique, IEEE Transactions on Medical Imaging, volume 35, number 5, May 2016; Volodymyr Mnih, Human-level control
through deep reinforcement learning, Nature, February 25, 2015; Igor Aizenberg, Naum N. Aizenberg, and Joos P.L. Vandewalle, Multi-valued and
universal binary neurons: Theory, learning and applications, Springer Science & Business Media, 2000; www.image-net.org; Yannis M. Assael et al,
LipNet: End-to-end sentence-level lipreading, University of Oxford (forthcoming); McKinsey Global Institute analysis
24
35
Exhibit 1
Glossary of automation technologies and techniques (continued)
JANUARY 2017
This list is not comprehensive but is meant to illustrate some of the technologies and techniques
that are being developed to enable automation of different work activities
Technologies
and techniques
Description/examples
Robotics
Soft robotics
Non-rigid robots constructed with soft and deformable materials that can manipulate
items of varying size, shape and weight with a single device. Soft Robotics Inc.
grippers can adaptively pick up soft foods (e.g., baked goods, tomatoes) without
damaging them.
Swarm
robotics
Tactile/touch
robotics
Robotic body parts (often biologically inspired hands) with capability to sense, touch,
exhibit dexterity, and perform variety of tasks
Serpentine
robots
Serpentine looking robots with many internal degrees of freedom to thread through
tightly packed spaces
Humanoid
robots
Robots physical similar to human beings (often bi-pedal) that integrate variety of AI
and robotics technologies and are capable of performing variety of human tasks
(including movement across terrains, object recognition, speech, emotion sensing,
etc.). Aldebaran Robotics and Softbanks humanoid Pepper robot is being used to
provide customer service in more than 140 Softbank Mobile stores in Japan
Autonomous
cars and
trucks
Wheeled vehicles capable of operating without a human driver. In July 2016, Tesla
reported that its cars had driven over 130 million miles while on Autopilot. In
December 2016, Rio Tinto had a fleet of 73 driverless trucks hauling iron ore 24
hours/day in mines in Western Australia
Unmanned
aerial
vehicles
Flying vehicles capable of operating without a human pilot. The unarmed General
Atomics Predator XP UAV, with roughly half the wingspan of a Boeing 737, can fly
autonomously for up to 35 hours from take-off to landing
Chatbots
Robotic
process
automation
Class of software robots that replicates the actions of a human being interacting with
the user interfaces of other software systems. Enables the automation of many backoffice (e.g., finance, human resources) workflows without requiring expensive IT
integration. For example, many workflows simply require data to be transferred from
one system to another
Automation
product
categories
SOURCE: www.ald.softbankrobotics.com; A tragic loss, Tesla blog, June 30, 2016; Resource revolution: Transformations beyond the supercycle, McKinsey
Global Institute, forthcoming in 2017; www.ga-asi.com/predator-xp; Jessie Young, How a bot named Dolores Landingham transformed 18Fs
onboarding, www.18f.gsa.gov, December 15, 2015; McKinsey Global Institute analysis
25
Some of AIs exploits are less heralded than its victory over a human champion of the
complex board game Go in March 2016.33 For example, a project by Googles DeepMind
and the University of Oxford has applied deep learning to a huge data set of BBC programs
to create a lip-reading system. Trained using more than 5,000 hours of BBC TV programs,
containing more than 100,000 sentences, it easily outperformed a professional human
lipreader. In tests on 200 randomly selected clips, the professional annotated just
12.4percent of words without error, while the computer annotated 46.8percent errorfreeand many of its mistakes were small ones, such as leaving a plural s off the end of a
word.34
Many other surprising technologies are making advances. Robot skin made of a
piezoelectronic transistor mesh developed by Georgia Tech and covered in thousands of
mechanical hairs is as sensitive as human skin and able to feel textures and find objects
by touch.35 In the social and emotional realm, Affectiva, a Boston-based company, uses
advanced facial analysis to monitor emotional responses to advertisements and other digital
media content, via a webcam.36 In the United Kingdom, the University of Hertfordshire
has developed a minimally expressive humanoid robot called KASPAR that operates as a
therapeutic toy for children with autism. Having physical, human-like properties, yet being
non-human, allows the children to investigate the human-looking featuresfor example,
squeezing KASPARs nose or tickling its toessafely and in a way that would not be
possible or appropriate with a real person.37
Such advances suggest that an idea toyed with by science fiction writers for at least a
centurythat of robots and other machines replacing men and women in the workplace on
a large scalecould soon become a reality. We seem to be approaching a new frontier, but
we have not arrived there quite yet.
26
pass them by. They generally cannot detect whether a customer is upset at a hospital bill or
a death in the family, and for now, they cannot answer What do you think about the people
in this photograph? or other open-ended questions. They can tell jokes without really
understanding them. They dont yet feel humiliation, fear, pride, anger, or happiness. They
also struggle with disambiguation, unsure whether a mention of the word mercury refers to
a planet, a metal, or the winged god of Roman mythology.
Moreover, while machines can replicate individual performance capabilities such as
fine motor skills or navigation, much work remains to be done integrating these different
capabilities into holistic solutions where everything works together seamlessly. Combining
a range of technologies will be essential for workplace automation, but engineering such
solutionswhether for hardware or softwareis a difficult process. The creation of
solutions that solve specific problems in the workplace is work that will have to be done as
individual technical challenges are overcome in the lab. Even once the technical feasibility
issues have been resolved and the technologies become commercially available, it can take
years before they are adopted.
Yet, given the speed with which technological advances are happening, reaching and
crossing the next frontier may just be a question of time. Moores lawthat the number of
transistors in a dense integrated circuit doubles approximately every two yearsmay be
slowing, but we are still seeing massive increases in computing power. Machine learning
and its subset deep learning continue to advance rapidly, while traditional AI algorithms
become more versatile and powerful. Cloud computing and other technologies are opening
new possibilities for more people to become involved in innovation. Academic research
in these areas, especially in artificial intelligence, has increased significantly, and global
markets are taking notice, with growing corporate investment in research and development.
When large-scale automation does come to the workplace, what will that mean for the
economy, for jobs, and for the future of work itself? And how fast could it happen?
Such existential questions are easier to answer through fiction. Capeks 1920 play about
robots ends with the destruction of mankind and robots discovering the meaning of love.
This report, by contrast, seeks to establish a fact base with which to address these issues
and a foundation for a more informed dialogue. Robots may not have a soul, but their
potential impact on the global economy can be calculated.
27
A man works on a robot at a digital factory in The Hague that produces carbon plates for the aircraft industry.
Bart Maat/European Pressphoto Agency b.v./Alamy Stock Photo
28
Bernie Monegain, IBM Watson pinpoints rare form of leukemia after doctors misdiagnosed patient,
Healthcare IT News, August 8, 2016.
41
The World Economic Forum has predicted that more than five million jobs could be lost to robots in 15 major
developed and emerging economies over the next five years. The future of jobs: Employment, skills, and
workforce strategy for the fourth Industrial Revolution, World Economic Forum, January 2016.
42
The Oxford University study, for example, focuses on occupations that it categorizes as being susceptible to
automation. Carl Benedikt Frey and Michael A. Osborne, The future of employment: How susceptible are jobs
to computerization? Oxford Martin School, September 17, 2013.
43
Sephora debuts two new bot-powered beauty tools for Messenger, PR Newswire, November 2, 2016.
40
Karl Marx, Grundrisse: Foundations of the critique of political economy, 1858 (unpublished
manuscript), available online at www.marxists.org/archive.
2
John Maynard Keynes, Economic possibilities for our grandchildren, in Essays in Persuasion,
Macmillan, 1933. The essay is available online at www.econ.yale.edu/smith/econ116a/keynes1.
pdf.
3
Technology and the American economy: Report of the National Commission on Technology,
Automation, and Economic Progress, US Department of Health, Education, and Welfare, 1966.
4
Stanley Lebergott, Labor force and employment 18001960, in Output, employment,
and productivity in the United States after 1800, Dorothy S. Brady, ed., NBER, 1966; World
Bank data.
1
30
Elizabeth Eisenstein, The printing press as an agent of change, Cambridge University Press,
1980; Robert Hoe, A short history of the printing press and of the improvements in printing
machinery from the time of Gutenberg up to the present day, 1902.
6
Growth and renewal in the United States: Retooling Americas economic engine, McKinsey
Global Institute, February 2011.
7
Ibid.
8
Josh Bivens and Lawrence Mishal, Understanding the historic divergence between productivity
and a typical workers pay: Why it matters and why its real, Economic Policy Institute briefing
paper number 406, September 2015; Poorer than their parents? Flat or falling incomes in
advanced economies, McKinsey Global Institute, July 2016.
9
See David H. Autor and David Dorn, The growth of low-skill service jobs and the polarization
of the US labor market, American Economic Review, volume 103, number 5, August 2013,
and Lawrence Mishel and Kar-Fai Gee, Why arent workers benefiting from labour productivity
growth in the United States? International Productivity Monitor, number 23, spring 2012.
10
Aaron Smith and Janna Anderson, AI, robotics, and the future of jobs, Pew Research Center,
August 6, 2014. There has been a proliferation of books by competing schools of technooptimists and techno-pessimists. They notably include Erik Brynjolfsson and Andrew McAfee,
The second machine age: Work, progress, and prosperity in a time of brilliant technologies, W.
W. Norton & Company, 2014; and Robert Gordon, The rise and fall of American growth: The
US standard of living since the Civil War, Princeton University Press, 2016; Martin Ford, Rise of
the robots: Technology and the threat of a jobless future, Basic Books, 2015. Also see Jason
Furman, Is this time different? The opportunities and challenges of artificial intelligence, remarks
at AI Now: The Social and Economic Implications of Artificial Intelligence Technologies in the Near
Term conference in New York, July 7, 2016.
5
31
Using data from the US Bureau of Labor Statistics and O*Net, we have examined in detail
more than 2,000 work activities for more than 800 occupations across the entire economy.
We estimated the amount of time spent on these activities and the technical feasibility
of automating each of them by adapting currently demonstrated technology. Having
undertaken this analysis of the US economy, we extended our study to 45 other countries,
using the most comparable data available in each.44 This detailed research enables us
to draw important conclusions about the technical feasibility of automation for the global
economy today, as well as for individual professions within specific sectors, from US
mortgage brokers to Indian farmers.
Our core findings are that the proportion of occupations that can be fully automated by
adapting currently demonstrated technologyin other words, all of their activities could
be automatedis very small, less than 5percent in the United States. Automation will
nonetheless affect almost all occupations, not just factory workers and clerks, but also
landscape gardeners and dental lab technicians, fashion designers, insurance sales
representatives, and CEOs, to a greater or lesser degree. The automation potential of
these occupations depends on the types of work activity that they entail, but as a rule of
thumb, about 60percent of all occupations have at least 30percent of activities that are
technically automatable.
In the United States, the country for which we have the most complete data, about
46percent of time spent on work activities across occupations and industries is technically
automatable based on currently demonstrated technologies. Exhibit2 shows the
distribution range of this automation potential in the United States. On a global scale, we
calculate that the adaptation of currently demonstrated automation technologies could
affect 49percent of working hours in the global economy. This potential corresponds to the
equivalent of 1.1billion workers and $11.9trillion in wages. Among countries, the potential
ranges between 40 and 55percent, with just four countriesChina, India, Japan, and the
United Statesaccounting for just over half the total wages and workers. The potential
could also be large in Europe: according to our analysis, the equivalent of 54million full-time
workers and more than $1.9trillion in wages are associated with technically automatable
activities in the continents five largest economies aloneFrance, Germany, Italy, Spain, and
the United Kingdom.
In this chapter we describe in detail the technical potential for automation in different sectors
of the economy and for the global economy as a whole, based on the state of technology
today. We explain how we calculate technical automation potential and, based on that
methodology, we identify categories of activities that are the most and the least susceptible
to automation. This enables us to provide detailed estimates of the technical automation
potential of sectors and of different occupations within those sectors. We conclude with an
examination of similarities and differences between countries, both advanced and emerging
economies, for a global view of automation and its very substantial potential to transform the
world of work.
44
32
Exhibit 2
While few occupations are fully automatable, 60 percent of all occupations have at least 30 percent technically
automatable activities
Automation potential based on demonstrated technology of occupation titles in the United States (cumulative)1
Share of roles (%)
100% = 820 roles
Example occupations
100
Chemical technicians,
nursing assistants,
Web developers
>90
>80
>70
>60
>50
26
34
42
>40
>30
>20
51
62
73
>10
Psychiatrists, legislators
>0
91
100
1 We define automation potential according to the work activities that can be automated by adapting currently demonstrated technology.
SOURCE: US Bureau of Labor Statistics; McKinsey Global Institute analysis
33
It should also be noted that technical feasibility is not the same as actual implementation
of automation, nor a complete predictor that an activity will be automated. A second factor
to consider is the cost of developing and deploying both the hardware and the software
solutions for automation. The cost of labor and related supply and demand dynamics
represent a third factor: if workers are in abundant supply and significantly less expensive
than automation, this could be a decisive argument against adoption. A fourth factor to
consider is the benefits beyond labor substitution, including higher levels of output, better
quality, and fewer errors. The economic value of these benefits is often larger than that
of reducing labor costs. Regulatory and social acceptance issues, such as the degree to
which machines are acceptable in any particular setting, must also be weighed. A robot
may, in theory, be able to replace some of the functions of a nurse, for example. But for now,
the prospect that this might actually happen in a highly visible way could prove unpalatable
for many patients, who expect and trust human contact. The pace at which automation will
take hold in a sector or occupation reflects a subtle interplay between these factors and the
trade-offs among them.
34
Physical capabilities. This includes gross motor skills, fine motor skills, navigation,
and mobility. These capabilities could be implemented by robots or other machines
manipulating objects with dexterity and sensitivity, moving objects with multidimensional
motor skills, autonomously navigating in various environments, and moving within and
across various environments and terrain.
Exhibit 3
Current technologies have achieved different levels of human performance across 18 capabilities
Below median
Automation capability
Median
Top quartile
Capability
level1
Description (ability to )
Sensory
perception
Sensory perception
Cognitive
capabilities
Recognizing known
patterns/categories
(supervised learning)
Creativity
Information retrieval
Output articulation/
presentation
Natural
language
processing
Natural language
understanding
Social and
emotional
capabilities
Navigation
Mobility
Physical
capabilities
1 Assumes technical capabilities demonstrated in commercial products, R&D, and academic settings; compared against human performance.
SOURCE: McKinsey Global Institute analysis
35
Machines will need to be able to use many of these capabilities together in the
workplace, as humans do
The 18 capabilities we have identified should not be taken in isolation. They are
closely interconnected.
Let us return to our retail salesperson, by way of example, to show the interplay of these
capabilities. Daily activities may include greeting customers, answering questions about
products and services, cleaning and maintaining work areas, demonstrating product
features, and processing sales and transactions. To carry out this range of activities requires
almost the full spectrum of these capabilities. It starts with the greeting of customers. A
skilled salesperson will identify the social and emotional state of a customer, accurately
draw conclusions about how to react to that social and emotional state, and through body
language, tone of voice, and choice of vocabulary, provide an emotionally appropriate
response. Cognitive capabilities will be fully used, too. Listening to what a customer says
and responding requires the ability to understand and generate natural language. Other
cognitive capabilities employed are the ability to retrieve information (do we have these
shoes in stock?); to reason logically and solve problems (we dont have them in your size
in black, but we do have them in red or brown); to coordinate with multiple agents (Ill
have one of my colleagues determine if we have the item in stock), and creativity (try the
purple pair, theyre very fashionable this year and will suit you well). Physical capabilities are
likewise also needed. They include mobility and navigation (walking to the stockroom), gross
motor skills (taking the shoe box off a shelf in the stockroom), and fine motor skills (tying
a lace).
For now, automation technologies do not have this full range of capabilities to perform at the
same level as humans, and for many problems, they have yet to be seamlessly integrated
into solutions. Combinations of social, cognitive, and physical capabilities are required for
many activities, and we do see patterns about which capabilities are often required together
(Exhibit4). For example, an activity that needs any social or emotional capability typically
needs all of themsensing, reasoning, and output. Likewise, an activity requiring one form
of physical capability such as fine motor skills or mobility tends to require multiple physical
capabilities, including gross motor skills and navigation. However, cognitive capabilities can
occur in combination with many different capabilities. There is an overlap between creativity
and optimization and planning, for example, but one can do without the other. Coordinating
with multiple agents does not automatically entail information retrieval, logical reasoning, or
45
36
Among the many factors that define levels of performance are the acceptable error rates, particularly for
sensory and cognitive activities. For instance, the consequences of false positives or negatives when making
certain law enforcement or health-care judgments could be much more significant than for other judgments in
the entertainment industry.
generating novel patterns. Moreover, where there are cognitive demands, physical demands
are less likely to be required.
Exhibit 4
Many capabilities tend to be required together for specific activities
Social
and
emotional
Reasoning
81 100
Sensing
80
89 100
42
44
46 100
41
42
43
69 100
Information
retrieval
22
24
24
51
42 100
Recognizing
known patterns
14
18
18
42
45
42 100
Generating novel
patterns
14
14
27
17
33
31 100
19
26
24
41
37
42
48
49 100
15
18
17
28
27
12
28
19
32 100
Creativity
16
20
22
23
20
23
26
34
35
20 100
Output articulation/display
10
10
35
37
42
31
15
24
10
24 100
Coordination with
33
multiple agents
31
31
12
15
11
-12
28
-1
Perception
16
13
13
24 100
Fine motor
skills/dexterity
-3
-5
-6
10
44 100
Gross motor
skills
-10 -13 -13 -50 -48 -37 -33 -18 -25 -16 -15 -36
11
43
79 100
Mobility
Navigation
Perception
Output articulation/display
Coordination with
multiple agents
Creativity
Optimization and
planning
Logical reasoning
Information
retrieval
Recognizing
known patterns
Generating novel
patterns
Generation
Understanding
100
Logical
Cogni- reasoning
tive
Optimization and
planning
Physical
Sensory Physical
Cognitive
Output
Natural Understanding
language Generation
Sensory
Sensing
High
Output
Low
Natural
language
Social and
emotional
Reasoning
Correlation between
capability scores
among activities
%
-9
-5
100
Navigation
-4
-8
-17
12
27
36
32 100
Mobility
-4
-9
-17
36
44
49
60 100
When machines can take on workplace activities, the nature of work will change. Today,
only about 10percent or less of the average human workers time at work is spent using
capabilities such as emotional reasoning and creativity, which many people would describe
as being a core part of the human experience. The capability most used is recognizing
known patterns, followed by natural language generation (for example, speaking), sensory
McKinsey Global Institute
37
Exhibit 5
Recognizing known patterns and natural language generation are the two most-used capabilities in work activities
Time spent by US workers on activities that require median or higher levels of human performance
for each capability
% of time
Recognizing known patterns
67
46
41
Sensory perception
Information retrieval
38
35
17
Output articulation/display
15
13
13
12
11
10
10
9
Mobility
Creativity
38
hardware and software costs and relative wage levels, a coherent business case needs to
be made, and regulatory, social, and organizational issues also play a role.
Exhibit 6
Both low and high-wage occupations have significant technical automation potential
Automatability1
%
100
90
File
clerks
80
70
60
50
40
30
Chief
executives
20
Landscaping
workers
10
0
10
15
25
20
30
35
40
45
50
55
60
65
70
75
80
85
90
95
100 105
Hourly wage
$
1 Our analysis used detailed work activities, as defined by O*NET, a program sponsored by the US Department of Labor, Employment and Training
Administration.
SOURCE: US Bureau of Labor Statistics; McKinsey Global Institute analysis
People in the lowest wage group, earning less than $15 per hour, carry out work activities
that have among the highest potential for automation, and as a whole a majority (51percent)
of this groups activities is automatable. However, those earning between $15 and $30
per hour have an automation potential of 46percent, which is close to the average for
the economy as a whole. Above this $15 to $30 wage level, there is no clear pattern or
correlation between wages and the automation potential of the work. More than 17million
Using a linear model, we find the correlation between wages and automatability (the percentage of time spent
on activities that can be automated by adapting currently demonstrated technology) in the US economy to be
significant (p-value < 0.01), but with a high degree of variability (r2 = 0.19).
46
39
American workers earn between $30 and $45 per hour, but the automation potential of this
group is similar to that of people earning $90 to $105 per hour, for example.
Similarly, higher education attainment levels and work experience are correlated with lower
technical automation potential, but there is also a great deal of variability.
Box2. Labor market polarization and the technical automation potential of occupation families
A body of work in the economics literature documents
occupations) for transportation, office administration,
polarization in the labor markets of developed
and production, in the middle of the distribution, have
countries, in which wage gains went disproportionately
higher percentages of activities with high technical
to those at the top and at the bottom of the income
automation potential (collecting data, processing data,
1
These
and skill distribution, not to those in the middle.
and predictable physical activities) than other occupation
observations have largely been based on workforce
families lower and higher in the distribution. However,
data from national statistical agencies. Our analysis at
one occupation family at the low end of the income
the level of individual activities supports the argument
distribution, food preparation, has the highest percentage
that some occupations in the middle of the income and
of time in activities with a high technical potential for
skill distribution are more susceptible to automation than
automation. Furthermore, as technology continues to
others at the top and bottom. As depicted in Exhibit7,
develop over time, the automation potential of different
occupation families (an aggregation of individual
activities will also increase.
David H. Autor, Why are there still so many jobs? The history and future of workplace automation, Journal of Economic Perspectives, volume
29, number 3, 2015.
40
Box2. Labor market polarization and the technical automation potential of occupation families
(continued)
Exhibit 7
Mix of activity types in selected occupation families
2
2
14
2
3
12
21
2
6
11
0
6
32
20
High
Automation
potential1
%
25
Low
24
34
Managing people
31
Applying
expertise
18
14
Interfacing with
stakeholders
20
39
0
5
15
83
0
14
23
23
35
58
17
33
Unpredictable
26
physical activities
Collecting data
64
Processing data
69
24
14
10
13
0
Occupation
family2
58
12
5
Personal
care
Office
administration
Produc- Sales
tion
Management
Weighted
10.41
hourly wage
$
11.76
12.45
16.12
16.56
16.98
17.79
49.24
FTEs
employed
Million
3.89
4.26
8.85
20.96
8.39
13.95
6.54
Food
preparation
11.85
Predictable
81
physical activities
Box 2
41
A third factor to consider are the benefits of automation beyond labor substitution. These
can include higher levels of output, raised quality, speed, agility, safety, and fewer errors.
The potential savings from these benefits can be larger than those from labor costs.
Finally, there is the issue of social and regulatory acceptability of automation. While selfdriving autos and trucks are undergoing tests in both the United States and Europe, they
will be able to operate without human co-drivers only when regulators are comfortable with
them doing so. Social acceptance may be even more difficult. While a robot in theory could
carry out some functions of a nurse or a home-care help, the human beings on the receiving
end of their care may balk at the idea.
Exhibit 8
Three categories of work activities have significantly higher technical automation potential
Time spent on activities that can be automated by adapting currently demonstrated technology
%
81
69
64
Time spent
in all US
occupations
%
Total wages
in US, 2014
$ billion
20
14
16
12
17
16
18
Interface3
Unpredictable
physical4
Collect
data
Process
data
Predictable
physical5
896
504
1,030
931
766
Manage1 Expertise2
596
26
18
1,190
Most
susceptible
activities
1 Managing and developing people.
2 Applying expertise to decision making, planning, and creative tasks.
3 Interfacing with stakeholders.
4 Performing physical activities and operating machinery in unpredictable environments.
5 Performing physical activities and operating machinery in predictable environments.
NOTE: Numbers may not sum due to rounding.
SOURCE: US Bureau of Labor Statistics; McKinsey Global Institute analysis
42
51%
of total
working hours
$2.7 trillion
in wages
47
Melia Robinson, This robot-powered burger joint could put fast food workers out of a job, Business Insider
UK, June 30, 2016.
43
Exhibit 9
Technical potential for automation across sectors varies depending on mix of activity types
Size of bubble indicates % of
time spent in US occupations
Sectors by
activity type
Manage Expertise
Interface
Unpredictable
Collect
physical
data
Process
data
Predictable
physical
50
100
Automation potential
%
Accommodation
and food services
73
Manufacturing
60
Agriculture
58
Transportation and
warehousing
57
53
Retail trade
51
Mining
Other services
49
Construction
47
Utilities
44
Wholesale trade
44
Finance and
insurance
43
Arts, entertainment,
and recreation
41
Real estate
40
Administrative
39
36
Information
36
Professionals
35
Management
35
Educational
services
27
44
45
46
Exhibit 10
The technical automation potential of the global economy is significant, although there is some variation
among countries
Employee weighted overall % of activities that can be automated
by adapting currently demonstrated technologies1
<45
>51
No data
1 Pakistan, Bangladesh, Vietnam, and Iran are largest countries by population not included.
SOURCE: Oxford Economic Forecasts; Emsi database; US Bureau of Labor Statistics; McKinsey Global Institute analysis
47
Exhibit 11
Technical automation potential is concentrated in countries with the largest populations and/or high wages
Potential impact due to automation, adapting currently demonstrated technology (46 countries)
Wages associated with
technically automatable activities
$ trillion
Automation potential
%
Japan
United
States
Remaining
countries
55
Remaining
countries
2.7
5.1
100% =
$15.8 trillion
4.1
1.1
India
1.1
Japan
China
1.7
India
332
100% =
1,109 million
FTEs
35
Japan 54
60
Europe Big 51
United States
Europe Big 51
394
China
233
India
52
China
51
United States
46
Europe Big 5
46
Rest of world
50
48
Exhibit 12
Differences in technical automation potential in India and China are driven by
differences in sector and occupation mix
Sectoral makeup of China and India
%; million FTEs
773
Rest
Construction
25%
(193)
11%
(85)
Retail trade
18%
(139)
Manufacturing
19%
(147)
$6.70
$4.41
$5.82
41%
54%
8%
(36)
10%
(45)
15%
(68)
Agriculture
$4.39
$2.40
42%
$3.79
56%
$2.54
67%
Construction
and extraction
Maintenance
China
India
45%
15
47%
11
47%
11
46%
86%
36
$5.33
Production
64%
42
51%
(232)
27%
(209)
454
16%
(73)
$3.03
$1.11
49%
38
59%
Transportation
49%
China
88%
45
64%
India
The second example highlights differences between Japan and the United States
(Exhibit13). Japan overall has an automation potential of 55percent of hours worked,
compared with 46percent in the United States. This difference is primarily due to a different
sectoral mix in the two economies, and within those sectors, a different weighting of jobs
with larger or smaller automation potential. For example, the automation potential of Japans
manufacturing sector is particularly high, at 71percent (compared with 60percent in the
United States). Japanese manufacturing has a slightly larger concentration of work hours in
production jobs (54percent of hours vs. 50percent) and office and administrative support
jobs (16percent vs. 9percent). Both of these job titles comprise activities with a relatively
high automation potential. By comparison, the United States has a higher proportion of work
hours in management, architecture, and engineering jobs, which have a lower automation
potential since they require application of specific expertise such as high-value engineering,
which computers and robots currently are not able to do. These differences outweigh
the higher level of wages in the United States than Japan, which affect the business case
for automation.
Similar differences exist among countries globally, for example, between Argentina and
Brazil, France and Germany, or Kenya, Nigeria, and South Africa. A detailed look at all 46
countries we have examined is available online.48
The data visualization can be found on the McKinsey Global Institute public site at tableau.com:
http://public.tableau.com/profile/mckinsey.analytics#!/
48
49
Exhibit 13
Japans manufacturing sector has a higher technical automation potential than
US manufacturing because of a different mix of occupations
Sectoral makeup of Japan and the United States
%; million FTEs
40%
(10)
Rest
$13.77
43%
(57)
Share of major
occupational groups in
manufacturing sector
%
132
26
Architecture
and engineering
Japan
United States
20%
7
$21.88
17%
Education
Administrative
support and
government
Health care
services
5%
(1)
11%
(3)
13%
(3)
14%
(4)
Retail trade
Manufacturing
17%
(4)
$15.40 38%
$14.46 50%
10%
(13)
$23.35 39%
$17.68 38%
13%
(17)
$21.67 27%
$14.32 55%
14%
(18)
$14.24 71%
27%
Management
Office and
administrative
25%
16
64%
61%
$23.38 26%
54
11%
(15)
$15.48 53%
9%
(12)
$22.05 60%
83%
Production
50
79%
United States
Japan
NOTE: Numbers may not sum due to rounding.
The technical potential to automate work activities in the global economy by adapting
currently demonstrated technologies is already close to 50percent, thanks to rapid
advances in automation technologies. That does not mean automation will occur overnight,
however, since technical potential is only one of several factors that will eventually lead to
automation adoption in the workplace. Only a tiny fraction of entire occupations could be
automated with current technologies, but activities across a wide spectrum are susceptible,
especially those involving predictable physical activities, data processing, and data
collection. What is the outlook for the development of these capabilities? How rapidly could
technical potential become workplace adoption? And what would the workplace then
look like? In the following chapters, we model some ways automation could arrive in the
workplace and lay out timeline scenarios for its actual adoption across the world.
50
51
ProPublica lists average waiting and treatment times in US emergency rooms, broken down by state, at https://projects.propublica.org/
emergency/. See also Lisa Esposito, Enduring really long waits at the emergency room, US News and World Report, May 8, 2015.
50
2015 Medical malpractice payout analysis, Diederich Healthcare, May 2015.
51
The unsettling feeling that people may experience when humanoid robots or audiovisual simulations closely resemble humans is known as
uncanny valley, a term coined by a Japanese robotics professor, Masahiro Mori, in a 1970 essay. The eeriness is largely prompted by the
machines appearance, which is realistic but not convincingly so.
52
Cheryl Gutherz and Shira Baron, Why patients with primary care physicians use the emergency department for non-emergency care, Einstein
Journal of Biology and Medicine, volume 18, number 4, 2001.
49
54
Fully automated
checkout including
medicines, billing
and issuing reports,
or, in the case of
hospitalization, bed
assignment
Lab tests would be
automated, including
report generation, for
improved accuracy
Potential economic
benefits of automation
70% Labor substitution
Autonomous tugs
can pull beds and
bring medicines and
instruments to the
point of care. Drugs
are dispensed by
automated pharmacy
AI diagnoses and
advice on complex
and high acuity
cases contribute to
better outcomes
Algorithms
recommend
diagnosis and
treatment to
doctors and nurse
practitioners
Increased productivity
of nurses and doctors
Reduced patient
waiting time
Better health care
outcomes
11% Relative impact1
1 Ratio between additional net
impact and operating cost.
55
Stephen Holloway, Straight and level: Practical airline economics, Routledge, 1997.
US Bureau of Labor Statistics, 2015.
55
Mary S. Reveley et al., Causal factors and adverse events of aviation accidents and incidents related to integrated vehicle health management,
National Aeronautics and Space Administration, March 2011.
56
Jeffrey OBrien, Maintenance: What causes aircraft accidents? Fiix, May 9, 2012.
53
54
56
In place of logging
inspection status
manually, compliance
documents are
automatically routed
to a secure site for
easy regulator access
Fewer technicians
remain on the
maintenance hangar
floor, but they spend
more time on problem
solving, and require
more continual training
Diagnostic
algorithms and
inspection robots
record all their
own compliance
information
automatically
Potential economic
benefits of automation
Robots do physical
tasks. Humans can
avoid danger zones,
and parts are installed
faster and with less
variability
Automated warehouse is
linked to procurement
department with robotic
part and tool delivery.
Automatic ordering
based on forecast
demand raises efficiency
Automated tugs
rather than technicians
move plane in and out
of hangar. Less human
time spent on tasks that
could be done by
automation cuts waste
57
Occupational fatalities during the oil and gas boomUnited States, 20032013, Morbidity and Mortality Weekly Report, Centers for Disease
Control and Prevention, May 29, 2015.
58
Elly Earls, Staying one step ahead with predictive maintenance technology, Mining-technology.com, October 15, 2013.
57
58
Petroleum engineers
are now joined by
programmers
onshore who work
to optimize
throughput
Engineers onshore
focus on innovation
and efficiency,
designing modular
equipment with
maintenance routines
for robots
Potential economic
benefits of automation
15% Labor substitution
Offshore surface
vessel 3D prints
components of
subsea factories
for robot vehicle
installation to
equipment
Subsea factories
act autonomously
for standard and
safety-oriented
operations
controlling flow and
limiting accidents
Offshore seafloor
robots operate,
modify, and install
small parts in
dangerous areas
previously serviced
by human divers
59
59
Amazon in December 2016 launched a store without cashiers, Amazon Go. Leena Rao, Amazon Go debuts as a new grocery store without
checkout lines, Fortune, December 5, 2016.
60
Continuous
inventory
tracking through
sensors and video
Automatic facial
recognition and
personalized
greeting on arrival.
Virtual assistants
provide directions
Automated stock
room manages
inventory and
prepares custom
orders, with delivery
by autonomous
drone or vehicle
Potential economic
benefits of automation
68% Labor substitution
61
60
61
Evan Nemeroff, Survey shows average mortgage closing time hits three-year low, National Mortgage News, August 22, 2014.
Occupational Employment Statistics, US Bureau of Labor Statistics, 2014.
62
No sector of the economy will be immune to automation. While our five hypothetical case
studies are not precise predictions about how automation will be deployed in the workplace,
they do signal some of the key benefits and challenges to come. Integrating technological
capabilities, retraining staff, adjusting processes, and, in some sectors, working out how to
make workers and customers comfortable interacting with machines rather than humans,
are among the considerable changes that will be required to maximize the benefits from
automation. Gains from labor substitution could be significant, but they will vary from
sector to sector. Performance gains, in the form of better quality, greater safety, and higher
productivity, could also be substantial, to judge by the findings of our case studies. How
quickly will any of this happen? In the next chapter, we analyze the factors that will hasten
or slow the adoption of automation, and project timelines for its implementation in the
global economy.
63
62
only really made a difference when people realized it would be more efficient to distribute
electrical energy through the building, and have separate electric motors in individual
machines, rather than one central motor that distributes mechanical energy.63
Today, technological advances in automation abound in areas from physical hardware and
robotics to artificial intelligence and software, as we discussed in Chapter 1. Yet much of
the innovation that we are seeing, from self-driving cars to digital personal assistants such
as Apples Siri, Amazons Alexa, and Google Assistant, are still in developmentand often
imperfect. That means there remains a lot of work to be done by scientists and engineers.64
Nicholas Carr, The big switch: Rewiring the world from Edison to Google, W. W. Norton, 2008.
For recent research on the modeling of enterprise 2.0 adoption, see Jacques Bughin, Taking the measure of
the networked enterprise, McKinsey Quarterly, October 2015, and Martin Harrysson, Detlef Schoder, and
Asin Tavakoli, The evolution of social technologies, McKinsey Quarterly, June 2016.
65
Justin Fox, The big spenders on R&D, Bloomberg News, April 29, 2016.
66
The age of analytics: Competing in a data-driven world, McKinsey Global Institute, December 2016.
63
64
66
See David H. Autor, Frank Levy, and Richard J. Murnane, The skill content of recent technological change: An empirical explanation, Quarterly
Journal of Economics, November 2003, and Daron Acemoglu and David H. Autor, Skills, tasks, and technologies: Implications for employment
and earnings, in Handbook of Labor Economics, volume 4B, David Card and Orley Ashenfelter, eds., Elsevier, 2011.
2
See, for example, Global wage report 2012/13, ILO, December 2012; OECD economic outlook 2012 volume 1, OECD, June 2012; Andreas
Hornstein, Per Krusell, and Giovanni L. Violante, The effects of technical change on labor market inequalities, Center for Economic Policy
Studies working paper number 113, July 2005.
3
David Autor, Skills, education, and the rise of earnings inequality among the other 99percent, Science, volume 344, issue 6186, May 2014.
4
Erik Brynjolfsson and Andrew McAfee, The second machine age: Work, progress, and prosperity in a time of brilliant technologies, W. W. Norton
67
See A labor market that works: Connecting talent with opportunity in the digital age, McKinsey Global Institute,
& Company, 2014.
June 2015, and Independent work: Choice, necessity, and the gig economy, McKinsey Global Institute,
October 2016.
1
67
Demand is also not static. New types of work activities and jobs are created all the time,
even as new technologies come on the market. Bank tellers and ATMs are one example.
ATMs were first installed in the United States and other developed economies in the 1970s,
and from the mid-1990s, banks rapidly increased their use of ATMs. Contrary to some
expectations, their advent actually increased the demand for human tellers, for two reasons.
First, ATMs reduced the cost of operating a bank branch, and banks responded by opening
more branches. Fewer tellers were needed in each branch, but more branches meant
that teller jobs did not disappear. Second, the tasks that ATMs could not doin particular,
developing relationships with clients such as small businessesbecame more valuable. For
tellers, the nature of their activities changed, with cash handling becoming less important
and human interaction more important.68
The relative costs of labor vs. automation will affect the pace and extent of adoption. If
workers are in abundant supply and significantly less expensive than automation, this could
be a decisive argument against it. For example, food service is one activity with a high
automation potential based on adapting currently available technologies. However, current
wage rates for this activity are among the lowest in the United States, reflecting both the
skills required and the size of the available labor supply. Since restaurant employees who
cook earn an average of about $10 per hour, a business case based solely on reducing
labor costs may be unconvincing.
Economic benefits
The potential economic benefits from automation are not limited to labor cost reductions.
As we noted in the case studies in Chapter 3, performance gains include increased profit,
increased throughput and productivity, improved safety, and higher quality, which are harder
to quantify than labor costs but no less tangible. In our hypothetical look at automation
of an oil and gas control room, for example, performance gains accounted for more than
three-quarters of the total benefits. There are also indirect benefits, such as wage growth,
and automations potential to create business and economic incentives that drive corporate
decision making, and unleash entrepreneurial energy. Automation could also spur policy
makers. However, these indirect benefits will have to be netted out against indirect costs
caused by automation, such as those associated with labor displacement
Regulatory and social acceptance
Automation faces some significant regulatory and social barriers to implementation. They
include safety and liability issues. One accident could trigger stringent regulations. Artificial
intelligence used in military robots or autonomous vehicles may have to make judgments
that harm people, creating moral controversy. Technology makers could also be exposed to
legal product liability if robots malfunction.
Privacy is also a potential barrier, especially in areas where personal data is highly sensitive,
such as health care; already, health care IT can struggle to link together different data sets
due to mandatory anonymization of data.
From a social perspective, too, automation will need to overcome some barriers. If many
workers lose jobs and are unable to find new ones, the social and political pressures against
automation could become significant. Humans may not want to adopt new technologies or
work with automated products due to fears about job security.
Finally, personal preferences and discomfort with technologies could prevent automation in
settings where human relationships are important, such as for caregivers.
68
68
James Bessen, Toil and technology, Finance & Development, volume 52, number 1, March 2015.
Exhibit 14
Five factors affect the pace and extent of automation; we model using four stages
Key factor
Technical feasibility
Cost of
developing and
deploying
Labor market
dynamics
Economic
benefits
Regulatory
and social
acceptance
Impact on
pace and
extent of
automation
For an
activity to be
automated,
every
capability
utilized for
that activity
must reach
the required
level of
performance
Costs
associated with
developing as
well as
deploying
different
solutions
determine the
pace of reaching
economic
feasibility
Economic
feasibility of
automation will
depend on
comparison with
cost of human
labor, affected
by supply and
demand
dynamics
In addition to
labor cost
savings,
automation
could bring
more benefits to
employers,
including
increased
quality and
efficiency and
decreased error
rate
Adoption of
automation
shaped by pace
of organizational
change, policy
choices, and
acceptance to
stakeholders
Stage
How we
model it
Capabilities
need to be
integrated to
form
solutions
Technical automation
potential
Solution development
Economic feasibility
Adoption
Estimate the
Estimate solution
Assume adoption
Model an S-shaped
technology progression
timeline for each
capability through
interviews and surveys
with industry and
academic experts
begins when
automation cost for an
activity is at parity with
labor cost
Compare labor wage
and solution cost
Occupation- and
country-specific
wages and their
evolution
Solution-specific
costs and their
reduction
NOTE: Economic benefits affect both when adoption will begin and its pace. For determining economic feasibility, we assume that decision-makers discount the
uncertain benefits of initial labor cost savings by roughly the same amount as they believe the also uncertain non-labor cost-related benefits will be captured.
SOURCE: McKinsey Global Institute analysis
69
The scenarios we have modeled create a time range for the potential pace of automating
current work activities. We have created two theoretical bookends, an earliest scenario,
in which all of the modeling parameters are flexed to the extremes of the set of plausible
assumptions that would result in faster automation development and adoption, and a
latest scenario, in which we flex all of the parameters in the opposite direction. The reality
will likely fall somewhere between the two. Modeling all of these factors, the date at which
50percent of the worlds current work activities are automated could be around 2055, but
we posit possible scenarios where that level of adoption occurs up to almost 20years earlier
or later. (Exhibit15).
Exhibit 15
Automation will be a global force, but adoption will take decades and there is significant uncertainty on timing
Time spent on current work activities1
%
Adoption
Early scenario
Late scenario
Technical automation
potential
Early scenario
Late scenario
100
90
80
70
60
50
40
30
20
10
0
2016 20
25
30
35
40
45
50
55
60
65
70
75
80
85
90
95
2100
1 Forty-six countries used in this calculation, representing about 80% of global labor force.
SOURCE: McKinsey Global Institute analysis
We stress that we are not making specific point predictions; we use scenarios to describe
the envelope of potential outcomes, and we fully acknowledge the simplification that comes
with any modeling exercise. For example, we do not account for all of the dynamics of the
labor market described above, including whether wages for specific occupations would
decline because displaced workers would increase labor supply.
DUPLICATE from ES
The model is likely to be precisely wrong but we hope it is directionally right with regard
to overall findings. Occupations within sectors with high automation potential today, jobs
that involve types of activities that we categorize as easiest to automate, such as physical
activities in a predictable environment or data collection and processing, will most likely
be among the first to feel the impact of automation. From a geographical perspective,
advanced economies are likely to deploy automation ahead of many emerging economies,
because of higher wage levels, which make a stronger business case for deployment, as
well as the nature of the solutions that will be needed to integrate the technologies into
the workplace.
70
Furthermore, while the macro effects on a nations entire economy may be quite slow (we
model the adoption of automation across several decades), the micro impact on particular
work activities, in certain sectors, and in individual countries, could be quite fast, as
competitive pressures come together with advances in technological development. That
is, for an individual worker who is displaced by automation, or a company whose industry is
disrupted by competitors using automation to shift the basis of competition, these effects
could occur quickly indeed.
Carlos A. Blanco et al., Beer discrimination using a portable electronic tongue based on screen-printed
electrodes, Journal of Food Engineering, volume 157, July 2015.
70
Giorgio Cannata and Marco Maggiali, Design of a tactile sensor for robot hands, in Sensors: Focus on
tactile, force and stress sensors, Jose Gerardo Rocha and Senentxu Lanceros-Mendez, eds., InTech, 2008.
71
Julia Sklar, Making robots talk to each other, MIT Technology Review, August 2015.
69
71
Social and emotional capabilities for now are below median human performance levels.
Despite advances in artificial intelligence, machines still have difficulty identifying social
and emotional states (sensing), drawing accurate conclusions about them (reasoning),
and responding with emotionally appropriate words or movements to them (output).
Physical capabilities are already at top-quartile human performance for gross motor
skills and navigation, which has enabled wide deployment of robots in industrial
automation, military, and defenseand given consumers turn-by-turn navigation apps
for their smartphones. For fine motor skills, we estimate that top-quartile performance
could be achieved when robotic hands have the same degrees of freedom as human
hands. Mobility remains a challenge, especially vertical mobility such as climbing stairs
and ladders.
Exhibit 16
Ranges of estimated time frames to reach the next level of performance for 18 human-related
performance capabilities
Rating
Below median
Median
Top quartile
Automation capability
Human performance
Median
Top quartile
Rating
Sensory
Sensory perception
Cognitive
capabilities
Natural
language
processing
Social and
emotional
capabilities
Physical
capabilities
20
30
72
40
50
60
70
2080
Natural language capabilities are critical for automation across many activities
Natural language understanding is of critical importance for a wide range of applications in
the workplace. Despite some technical advances in this capability, including the accuracy
of machine translation, machines still have a long way to go to achieve median human
performance. The speed of technological advances in natural language capabilities in the
future will substantially affect the timelines for automation overall.
The development of higher levels of natural language understanding is the single most
important factor constraining the technical automation potential of activities for which
the current performance level of technologies is insufficient. In the earliest scenario for
automation, the current level of performance in natural language constrains the proportion
of all activities that can be automated by 18percent. In the latest scenario, the current level
of natural language understanding would hinder automation of 40percent of activities, since
other capabilities will have reached their required performance levels by then.
Natural language processing capabilities have advanced in recent years and will likely
continue to develop and improve, led by their use in auto (in-vehicle speech recognition),
health care (clinical documentation improvements), and general personal use (virtual
assistants in both mobile and fixed devices). Technology companies and venture capitalists
continue to invest heavily in technologies related to natural language processing. Algorithms
can write passages and new articles that are largely indistinguishable from those written by
humans, and many experts expect continued rapid technical advances; by 2018, according
to one prediction, machines could write as much as 20percent of all business content.72
Bernard Marr, Why management dashboards and analytics will never be the same again, Forbes, January
21, 2016; Gartner predicts our digital future, Gartner, October 6, 2015.
73
Lucas Matney, Siri-creator shows off first public demo of Viv, the intelligent interface for everything,
TechCrunch, May 9, 2016.
74
Anthony Vecchione, New automated packaging system ensures patient safety, Drug Topics, November
22, 2004.
72
73
On average, we found that solution development takes one year for our earliest scenario
and nine years for the latest. Some of the longest time frames were for social and emotional
capabilities, whereas a number of the cognitive capabilities can be integrated much more
rapidly (Exhibit17).
Exhibit 17
Development timelines for solutions associated with each capability
Minimum
Maximum
Automation capability
25th percentile
50th percentile
75th percentile
Sensory
Sensory perception
Cognitive
capabilities
Natural
language
processing
Social and
emotional
capabilities
Physical
capabilities
10
makers discount the benefits of initial labor cost savings by roughly the same amount as
they believe the also uncertain non-labor cost-related benefits will be captured. In our
experience, business leaders tend to view labor cost savings as being more predictable
than other benefits.
Moreover, as we will discuss in the section on the international impact of automation, the
overall lower level of wages in some emerging economies could mean that automation
proceeds more slowly there than in advanced economies, where wages are higher than the
global average. The cost of labor is not necessarily fixed, however. The related labor supply
and demand dynamics are also a factor in the timeline for automation, as discussed above,
but we do not model these dynamics.
75
76
75
76
Exhibit 18
Historic adoption curves for technological innovations
Adoption trend by technology1
Fast case
Slow case
90
80
70
60
50%
adoption
50
40
30
20
10
0
10
15
20
25
30
35
40
45
Years since adoption
1 Technologies considered include airbags, antilock braking systems, cellphones, cloud CRM, cloud ERP, cloud SCM, color TVs, copper production through
leaching, dishwashers, electronic stability control, embolic coils, Facebook, instrument landing systems, laparoscopic surgery, Lithium-ion cell batteries,
microwaves, MRI, online air booking, P2P remote mobile payment, pacemakers, PCs, smartphones, stents, TVs, and VCRs.
SOURCE: McKinsey Global Institute analysis
The adoption of technologies within enterprises include factors beyond those that underpin
consumer adoption. For example, the technology adoption literature discusses rank effects
(that is, how the different individual characteristics of firms, such as their size, can affect
the rate and extent to which they adopt new technologies) and the effects of competitive
dynamics (that is, how the adoption of new technology by one company in an industry
could influence the adoption of technology by other companies in that industry).77 We do
not model firm-level adoption dynamics; our model takes advantage of the fact that at a
high level for economies and industries, the net result of the enterprise adoption factors are
S-shaped curves that resemble those for consumer adoption.
This combination of technical feasibility, solution development, economic feasibility, and
adoption enables us to model a set of scenarios that encompass various time frames for
the pace of automation. To illustrate, we detail a specific example, driving heavy trucks (see
Box5, Driving heavy trucks: Modeling scenarios for adoption of automation).
Adoption will ultimately depend on several factors include overcoming possible policy
barriers and resistance to automation, which are meant to be captured in scenarios in the
adoption stage of the model. For instance, given the importance of technological advances,
intellectual property or regulatory issues could delay certain companies from being able to
deploy specific technologies.
See Massoud Karshenas and Paul Stoneman, Rank, stock, order, and epidemic effects in the diffusion
of new process technologies: An empirical model, RAND Journal of Economics, volume 24, issue 4,
1993, and Marc Anthony Fusaro, The rank, stock, order and epidemic effects of technology adoption: An
empirical study of bounce protection programs, The Journal of Technology Transfer, volume 34, issue 1,
February 2009.
77
77
The detailed work activity title is operating vehicles or material-moving equipment in the US
Bureau of Labor Statistics taxonomy.
2
US Bureau of Labor Statistics; Oxford Economic Forecasts.
3
Taxonomy and definitions for terms related to driving automation systems for on-road motor
vehicles, Society of Automotive Engineers, September 30, 2016.
1
78
China earliest
China latest
100
90
80
70
60
50
40
30
20
10
0
2015
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90
95 2100
05
2110
1 The detailed work activity (DWA) is 4.A.3.a.4.I01.D06. Occupations using this activity include: Heavy and Tractor-Trailer Truck Drivers, Industrial Truck and
Tractor Operators, etc.
SOURCE: US Bureau of Labor Statistics; McKinsey Global Institute analysis
There could be a potential retrofit opportunity for more recent vehicles with electronic control systems, and
perhaps the number of autonomous trucks necessary to meet current demands could be lower than the
current number of trucks because of higher utilization. However, the basic point remains, that adoption will
take years and large amounts of capital to reach its maximum level.
Box 5
McKinsey Global Institute
79
80
Exhibit 20
Differences in the adoption timing are primarily driven by technical feasibility, and in the earliest scenario,
also by economic feasibility
Decomposition of average time to 50% adoption into stages by types of activities, global
Years
Adoption
Earliest
scenario
27
5
5
25
24
2
3
13
69
Solution development
Technical feasibility
22
3
3
15
14
Latest
scenario
Economic feasibility
17
5
1
16
14
5
2
49
48
67
62
16
16
54
16
11
16
11
43
16
16
16
13
13
12
7
33
13
6
32
30
6
7
18
14
14
7
Share of time
automatable1
%
Interfacing
with
stakeholders
Unpredictable Collecting
physical
data
labor
Processing
data
Predictable
physical
labor
14
24
38
73
74
23
72
81
Exhibit 21
Automation impact will be global under multiple modeled scenarios
% of work hours automated
100
2036
2066
51%
99%
2%
46%
Early
scenario
Latest
scenario
SOURCE: US Bureau of Labor Statistics, 2014 O*Net database; McKinsey Global Institute analysis
82
No data
83
Exhibit 22
Wages associated with automated activities are modeled to be highly concentrated in countries with higher wages
and populations
Wages associated with automated activities modeled1
$ trillion
Top 4
countries
Early scenario
5.5
(18%)
2036
6.6
(22%)
Total =
30.3
2066
27.8
(22%)
Total =
125.8
Remaining
countries
Late scenario
1.7
Japan
0.1
Germany
1.9
India
0.2
Japan
5.3
United
States
0.2
China
0.9
United
States
0.3
(13%)
0.6
(27%)
18.2
(60%)
21.6
(17%)
Other
top 10
Total =
2.2
1.3
(61%)
9.2
China
6.0
Japan
3.5
Japan
12.0
India
5.0
India
16.1
United
States
8.2
United
States
20.4
China
10.0
(17%)
13.3
(22%)
76.4
(61%)
42.3
Total =
60.3
China
37.0
(61%)
1 Forty-six countries used in this calculation, representing 78% of global labor force; calculations based on current FTEs in each sector, not considering FTE
growth and sector migration.
NOTE: Not to scale. Numbers may not sum due to rounding.
SOURCE: US Bureau of Labor Statistics; McKinsey Global Institute analysis
84
78
85
5. AN ENGINE OF PRODUCTIVITY
The world is in need of a new engine of GDP growth. Shifting demographics in many
countries brought on by aging populations and declining birthrates are reducing the share
of working-age populations and creating an economic growth gap: in the not-so-distant
future, without an acceleration in productivity growth, there will not be enough workers for
countries to meet their aspirations for growth in GDP per capita.
In this context, automation could be a significant opportunity. Our estimates suggest it could
help serve as a new productivity engine for the global economy, bridging that economic
growth gap. Automation could raise global productivity by as much as 0.8 to 1.4percent
annually. While that will not be enough to ensure all countries meet their per capita GDP
growth aspirations, it will make a major contribution toward that goal.
In order for this growth to take place, people will need to keep workingalongside the
robots that will help provide the productivity boost. Even with automation, a deficit of labor
is more likely than a surplus. Yet the adoption of automation will change the nature of work,
and the public debate about it often focuses on the prospect that it could lead to very
large-scale unemployment. Such fears are not new: already back in 1966, a US government
commission noted concerns that technological change would in the future not only cause
increasing unemployment, but that eventually it would eliminate all but a few jobs, with the
major portion of what we now call work being performed automatically by machine.79
In fact, the large-scale shifts in employment that automation will enable are of a similar
order of magnitude to the long-term technology-enabled shift in the developed countries
workforces away from agriculture in the 20th century. That movement did not result in
long-term mass unemployment because it was accompanied by the creation of new
types of work not foreseen at the time. We cannot definitively say whether things will be
different this time. But our analysis does show that automation will fundamentally alter the
workplace, requiring all workers to cohabit extensively with technology and reshaping the
corporate landscape.
Technology and the American economy, Report of the National Commission on Technology, Automation and
Economic Progress, US Department of Health, Education and Welfare, February 1966.
80
The global productivity challenge created by waning employment growth is detailed in our report Global
growth: Can productivity save the day in an aging world? McKinsey Global Institute, January 2015. The
G19 countries are the G20 minus the European Union: Argentina, Australia, Brazil, Canada, China, France,
Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the
United Kingdom, and the United States. Including Nigeria, these 20 countries generate more than 80percent
of global GDP.
79
Prior MGI research has shown that even if productivity growth maintains its 1.8percent
annual rate of the past half century, the rate of GDP growth will fall by as much as 40percent
over the next 50years. On a per capita basis, the GDP growth decline is about 19percent
(Exhibit23). In order to compensate for slower employment growth, productivity would need
to grow at a rate of 3.3percent annually, or 80percent faster than it has grown over the past
half century.81
Exhibit 23
Without an acceleration in productivity growth, demographic trends will cut GDP growth by nearly half,
causing a decline in historic GDP per capita growth rate
Historical vs. future GDP and GDP per capita growth
Compound annual growth rate, 19642014 historic and 201565 projected
%
GDP growth
Productivity growth
Employment growth
3.5
-46%
1.8
2.1
1.9
1.6
1.8
1.8
1.7
1.8
0.3
0.1
Past 50 years
(19642014)
-19%
-0.2
Next 50 years
at historical
productivity growth
(201565)
Past 50 years
(19642014)
Next 50 years
at historical
productivity growth
(201565)
The size of the workforce over the next 50years is too small to maintain current
per capita GDP growth without accelerating productivity growth
An economic growth gap has opened up as a result of the shrinking workforce. The number
of full-time equivalents needed just to maintain the current GDP per capita over the next
50years is larger than the number of workers who will be available, given demographic
trends in most countries. We estimate this gap in economic output as being about
130million full-time equivalents (FTEs) for the G19 countries and Nigeria alone. (In other
words, the economic output equivalent to an additional 130million full-time workers would
be needed to maintain current GDP per capita, assuming no productivity gains.) If countries
are to achieve more ambitious longer-term growth in line in line with their development and
81
88
Global growth: Can productivity save the day in an aging world? McKinsey Global Institute, January 2015.
Our estimate of employment growths contribution to GDP growth in this report differs slightly from this earlier
research, as we have assumed productivity measured in each country, rather than a global average.
5. An engine of productivity
the aspirations of their citizens goals (that is, growth in GDP per capita), the gap would be
considerably largerthe economic output of about 6.7billion FTEs by 2065 (Exhibit24).
Exhibit 24
Demographic trends are creating a pressing need for an acceleration in productivity growth
GDP growth for G19 and Nigeria
Compound annual growth rate
%
Historical
19642014
Future
201565
3.5
2.9
Productivity
growth
1.8
2.8
Employment
growth
1.7
0.2
0.1
0.1
0.1
Historical
Required to
maintain current
GDP per capita
Required to
achieve projected
GDP per capita
2.1
2.5
0.1
6.7
For the purposes of our analysis, we based our country-level GDP projections on
McKinseys proprietary Global Growth Model. This model projects a global GDP growth
rate of 2.9percent, resulting in an annual productivity growth of 2.8percent. For advanced
economies overall, the projections in the McKinsey model result in a compound annual
growth of GDP per capita to 2030 of 1.4percent, and 3.4percent for emerging economies.
SIMILAR from ES
(no RH cols with orange)
89
For the G19 countries and Nigeria that we discuss in this report, the model projects GDP
growth of 2.7percent, resulting in GDP per capita growth of 2percent to 2030.82
The growth gap between the projected growth and growth that must be provided by
productivity increases is most pronounced in fast-growing countries such as China, India,
Indonesia, and Nigeria, but it is also prevalent in Germany and Japan and other countries
that are already experiencing a slowdown or decline in the working-age population.
Furthermore, productivity growth has slowed in many countries.83
Exhibit25 illustrates the need for continued productivity growth, even just to maintain GDP
per capita (an admittedly unsatisfactory outcome) in both the medium term (by 2030) and
in the long term (by 2065) for the 20 largest economies in the world. Without productivity
growth, aging countries with older demographics simply would not have enough workers
needed to maintain GDP per capita. Younger countries have more than enough workers to
maintain GDP per capita.
Automation can help bridge the projected growth gap by compensating for the
slowdown in workforce growth
Our analysis of the automation adoption scenarios suggests that automation could help
bridge the projected growth gap caused by a deficit of full-time equivalents worldwide.
Automation alone will not be sufficient to achieve long-term target growth across the world,
given the decline in the working-age population and the need for high productivity to achieve
that target. Especially in fast-growing countries, other measures to boost productivity will be
needed. However, notably, the productivity gains from automation could suffice to at least
maintain todays GDP per capita.
Our methodology takes into account only labor substitution gains. Other performance
gainsin the form of improved quality, fewer breakdowns, greater safety, and so onwould
come on top of this overall productivity boost. We also assume that human labor displaced
by automation would rejoin the workforce and be as productive as it was in 2014, that is,
new demand for labor will be created. In some ways, this is a conservative assumption,
given that if automation produces productivity gains, we assume displaced labor reenters
the workforce at a lower level of productivity than the level of labor productivity at the time
the displacement occurs. Others could argue that the activities performed by workers who
are displaced by automation could have lower levels of economic output than the activities
that had been taken over by machines. In any case, it is vital that there be new demand for
labor displaced by automation.
McKinsey & Companys proprietary Global Growth Model provides complete time-series data for more
than 150 concepts and 110 countries over 30years. It incorporates more than a dozen major international
databases from such institutions as the United Nations, the World Bank, the International Monetary Fund,
and the Bank for International Settlements. The structure of the model emphasizes the drivers of economic
growth, including demographic factors, education, energy supply, physical capital, and some determinants
of total factor productivity. It captures the long-term effects of urbanization and industrialization, as well as
the impact of sociopolitical institutions, especially on finance and governance. Because business-cycle
fluctuations affect growth in the short term, the model also links trade and international capital flows, credit
and asset markets, and the monetary relationships that determine inflation, interest rates, and exchange rates.
See the technical appendix for more details. The growth model shows a compound annual growth rate for
GDP and GDP per capita for 2015 to 2030 by country as follows: China 5.1percent GDP, 4.9percent GDP
per capita; France 1.0percent and 0.6percent; Germany 1.3percent and 1.6percent; India 5.8percent and
4.8percent; Italy 0.5percent for both GDP and GDP per capita; Japan 1.0percent and 1.3percent, United
Kingdom 1.5percent and 1.0percent; United States 2.2percent and 1.4percent.
83
Global growth: Can productivity save the day in an aging world? McKinsey Global Institute, January 2015.
82
90
5. An engine of productivity
Exhibit 25
Aging countries have the greatest need for productivity growth just to maintain GDP per capita
FTE gap between FTE projections and number of FTEs to maintain current GDP per capita, 2030 and 2065
Gap indexed as % of number of FTEs in 2014
FTE deficit
Medium term, 2030
France
-0.16
-0.12
-0.07
Germany
Italy
-0.14
-0.09
-0.15
-0.07
Japan
-0.09
-0.03
South Korea
-0.12
-0.02
United Kingdom
-0.04
United States
-0.04
-0.10
-0.06
-0.04
0.04
Brazil1
-0.11
-0.02
China
-0.08
-0.05
Russia
Indonesia
Mexico
0.16
0.10
0.11
0.11
0.06
Nigeria
South Africa
0.84
0.19
Saudi Arabia
Turkey1
0.23
0.16
India
Young
emerging
economies
0.03
0.06
Argentina1
Aging
emerging
economies
-0.13
-0.10
Canada
Aging
developed
economies
-0.06
Australia
FTE surplus
-0.02
0.19
0.10
0.05
-0.02
1 Countries on borderline of demographic categorization between aging and growing populations (under 1 million FTE surplus/deficit in 2065) categorized
according to demographic statistics and grouping of similar regional economies.
SOURCE: The Conference Board Total Economy database; International Labour Organisation; United Nations Population Division; Statista; McKinsey Global
Institute analysis
91
Only considering the labor substitution effects on current work activities, and assuming
that displaced labor reenters the workforce at 2014 levels of productivity, we estimate
that, by 2065, the productivity enabled by automation could potentially increase economic
growth by 0.8percent to 1.4percent annually, the equivalent of 1.1billion to 2.3billion FTEs.
(Exhibit26).
Exhibit 26
Globally, automation could become a significant economic growth engine as employment growth wanes
GDP growth for G19 and Nigeria
Compound annual growth rate
%
Historical
19642014
Future
201565
3.5
2.9
Productivity
growth
1.8
2.8
Employment
growth
1.7
1.4
0.2
0.1
1.5
0.8
0.1
0.1
0.1
0.1
Historical
Required to
maintain current
GDP per capita
Required to
Early scenario
Late scenario
achieve projected
Potential impact of automation
GDP per capita
2.1
2.5
0.1
6.7
0.51.1
REPEATS in report
92
0.9
5. An engine of productivity
Exhibit27 shows what the effect of automation could be on the gap between growth targets
and economic output by country for the G19 and Nigeria. We discuss individual countries
and groupings of countries in more detail later in this chapter.
Exhibit 27
Modeled effects of automation on the gap between growth targets and economic output by 2030
Normalized as % of 2014 GDP
10
20
30
40
Australia
Canada
France
Aging
developed
economies
Germany
Italy
Japan
South Korea
United Kingdom
United States
Argentina
Aging
emerging
economies
Brazil
China
Russia
India
Indonesia
Mexico
Young
emerging
economies
Nigeria
Saudi Arabia
South Africa
Turkey
NOTE: Surplus/deficits calculated as gap to projected GDP in 2030 as a percentage of 2014 GDP by using population projections; base case (no automation)
40
assumes 2014 productivity. Assumes no-130
other productivity growth than that provided by automation.
SOURCE: The Conference Board Total Economy database; International Labour Organization; United Nations Population Division; McKinsey Global Institute
analysis
93
While our estimates of the productivity boost from automation are substantial, they are of an
order of magnitude comparable to major technologies that have been introduced in the past
two centuries. For example, between 1850 and 1910, the steam engine has been estimated
to have enabled productivity growth of 0.3percent per annum. Analyses of the introduction
of robots in manufacturing and IT estimate that they have accounted for annual productivity
increases of 0.4percent and 0.6percent, respectively (Exhibit28).84 One difference is
that automation of current work activities as we have analyzed it encompasses multiple
technologies, not just one.
Exhibit 28
Automation of existing activities could increase productivity at magnitudes similar to other major technologies
Productivity growth
Compound annual growth rate
%
Earliest scenario
Latest scenario
2.2
1.4
0.6
0.8
0.3
0.4
0.3
Automation
(201530)
Automation
(201565)
Steam engine
(18501910)
Robots
(19932007)
IT
(19952005)
NOTE: We include multiple technologies in our analysis of "automation," so these technologies are not entirely comparable, but meant to provide an order of
magnitude comparison.
SOURCE: Nicholas Crafts, Steam as a general purpose technology: A growth accounting perspective, Economic Journal, volume 114, issue 495, April 2004;
Mary OMahony and Marcel P. Timmer, Output, input, and productivity measures at the industry level: The EU KLEMS database, Economic
Journal, volume 119, issue 538, June 2009; Georg Graetz and Guy Michaels, Robots at work, Centre for Economic Performance discussion paper
1335, March 2015; McKinsey Global Institute analysis
Nicholas Crafts, Steam as a general purpose technology: A growth accounting perspective, Economic
Journal, volume 114, issue 495, April 2004; Mary OMahony and Marcel P. Timmer, Output, input, and
productivity measures at the industry level: The EU KLEMS Database, Economic Journal, volume 119,
issue 538, June 2009; George Graetz and Guy Michaels, Robots at work, Centre for Economic Performance
discussion paper number 1335, March 2015.
84
94
5. An engine of productivity
data to identify transformational improvement opportunities, opening economies to crossborder flows, and crafting a regulatory environment that fosters increased productivity and
innovation.85
Global growth: Can productivity save the day in an aging world? McKinsey Global Institute, January 2015.
85
95
Exhibit 29
In the United States, automation can help achieve projected GDP per capita growth
Projected FTEs
75
80
85
90
95 2000 05
10
15
20
25
30
35
40
45
50
55
60 2065
NOTE: The projected GDP per capita scenario for the United States uses projections from McKinsey's Global Growth model, with GDP compound annual
growth rate (CAGR) for 201565 of 1.9%, resulting in a productivity CAGR of 1.5%. The maintain current GDP per capita scenario assumes GDP will grow
at the same rate as population (0.5% CAGR for 201565), resulting in a productivity CAGR of 0.1%. See technical appendix for details.
SOURCE: The Conference Board Total Economy database; International Labour Organisation; United Nations Population Division; McKinsey Global Institute
analysis
5. An engine of productivity
Exhibit 30
Automation can contribute to productivity growth in China, but its high projected GDP per capita growth requires
additional productivity levers
Projected FTEs
75
80
85
90
95 2000 05
10
15
20
25
30
35
40
45
50
55
60 2065
NOTE: The projected GDP per capita scenario for China uses projections from McKinsey's Global Growth model, with GDP compound annual growth rate
(CAGR) for 201565 of 4.0%, resulting in a productivity CAGR of 4.5%. The maintain current GDP per capita scenario assumes GDP will grow at the same
rate as population (-0.2% CAGR for 201565), resulting in a productivity CAGR of 0.3%. See technical appendix for details.
SOURCE: The Conference Board Total Economy database; International Labour Organisation; United Nations Population Division; McKinsey Global Institute
analysis
86
87
97
In Exhibit31, we highlight Brazil as another example in this group. The model shows that
early adoption of automation could allow Brazil to meet its medium term GDP per capita
growth expectations. But finding additional levers to accelerate Brazils productivity growth
would be beneficial in both the medium term, as the majority of the adoption scenarios show
automation not providing sufficient economic growth to meet projected GDP per capita
growth, and in the long term.
Exhibit 31
Automation of existing activities could help Brazil meet its medium-term GDP per capita growth aspirations,
but additional productivity acceleration could be required
Projected FTEs
75
80
85
90
95 2000 05
10
15
20
25
30
35
40
45
50
55
60 2065
NOTE: The projected GDP per capita scenario for Brazil uses projections from McKinsey's Global Growth model, with GDP compound annual growth rate
(CAGR) for 201565 of 3.3%, resulting in a productivity CAGR of 3.2%. The maintain current GDP per capita scenario assumes GDP will grow at the same
rate as population (0.2% CAGR for 201565), resulting in a productivity CAGR of 0.1%. See technical appendix for details.
SOURCE: The Conference Board Total Economy database; International Labour Organisation; United Nations Population Division; McKinsey Global Institute
analysis
5. An engine of productivity
75
80
85
90
95 2000 05
10
15
20
25
30
35
40
45
50
55
60 2065
NOTE: The projected GDP per capita scenario for Saudi Arabia uses projections from McKinsey's Global Growth model, with GDP compound annual growth
rate (CAGR) for 201565 of 2.2%, resulting in a productivity CAGR of 1.6%. The maintain current GDP per capita scenario assumes GDP will grow at the
same rate as population (0.6% CAGR for 201565), resulting in a productivity CAGR of 0.1%. See technical appendix for details.
SOURCE: The Conference Board Total Economy database; International Labour Organisation; United Nations Population Division; McKinsey Global Institute
analysis
Saudi Arabia beyond oil: The investment and productivity transformation, McKinsey Global
Institute, December 2015.
2
Ibid.
1
99
Exhibit 33
In Nigeria, automation can contribute substantially to economic growth, but adding other means of productivity
growth will likely be required to meet expectations
Projected FTEs
75
80
85
90
95 2000 05
10
15
20
25
30
35
40
45
50
55
60 2065
NOTE: The projected GDP per capita scenario for Nigeria uses projections from McKinsey's Global Growth model, with GDP compound annual growth rate
(CAGR) for 201565 of 5.3%, resulting in a productivity CAGR of 2.4%. The maintain current GDP per capita scenario assumes GDP will grow at the same
rate as population (2.4% CAGR for 201565), resulting in a productivity CAGR of -0.5%. See technical appendix for details.
SOURCE: The Conference Board Total Economy database; International Labour Organisation; United Nations Population Division; McKinsey Global Institute
analysis
The future of jobs: Employment, skills, and workforce strategy for the fourth Industrial Revolution, World
Economic Forum, January 2016. Other forecasters have made specific predictions about large-scale
job losses related to automation or painted scenarios of a world without work. See Jeremy Bowles, The
computerization of European jobs, Bruegel, July 2014; Martin Ford, Rise of the robots: Technology and the
threat of a jobless future, Basic Books, 2015; and Carl Benedikt Frey and Michael A. Osborne, The future of
employment: How susceptible are jobs to computerisation? Oxford Martin School, September 17, 2013.
88
100
5. An engine of productivity
Such anecdotal evidence is underscored by macroeconomic data. Positive gains have been
reported in both productivity and employment in the United States in more than two-thirds
of the years since 1929 despite the rapid onward march of technological development.89
One-third of new jobs created in the United States in the past 25years did not exist, or
barely existed, 25years ago.90 Moreover, every three months about 6percent of US jobs are
destroyed by shrinking or closing businesses, while a slightly larger percentage of jobs are
added.91 This is not just a US phenomenon; findings from other countries indicate that these
are global trends. For example, a detailed analysis of the French economy by McKinseys
French office, published in 2011, showed that while the internet had destroyed 500,000
jobs in France in the previous 15years, it had created 1.2million others, a net addition of
700,000, or 2.4 jobs created for every job destroyed.92
Will this pattern continue with automation, or could things be different this time? (See Box7,
Is this time different?). Certainly the scale and potential scope of the work activities that
have the potential to be automated are very substantial indeed. Our model contemplates the
possibility that hundreds of millions of workers will have to shift the activities they are paid
to do.
Yet even this sort of large-scale structural economic shift over such a long period of time
is not unprecedented. In the United States, for example, the share of farm employment fell
from 40percent in 1900 to 2percent in 2000, while the share of manufacturing employment
fell from 25percent in 1950 to less than 10percent in 2010 (Exhibit34).93 In both cases, the
jobs that disappeared were offset by new ones that were created, although what those new
jobs would be could not be ascertained at the time.
Whatever the net impact on employment, the nature of work will change with automation.
There will be tighter integration between humans and machines than there is today, and this
will increase overall efficiency, since machines will be more accurate with the activities that
they take on. This will free up humans to perform tasks that use higher-level capabilities,
especially those that require social and emotional ones.
Growth and renewal in the United States: Retooling Americas economic engine, McKinsey Global Institute,
February 2011.
90
Global growth: Can productivity save the day in an aging world? McKinsey Global Institute, January 2015.
91
Artificial intelligence, automation, and the economy, Executive Office of the President, December 2016.
92
Impact dinternet sur lconomie franaise: Comment internet transforme notre pays (The internets impact on
the French economy: How the internet is transforming our country), McKinsey & Company, March 2011.
93
Stanley Lebergott, Labor force and employment 18001960, in Output, employment, and productivity in
the United States after 1800, Dorothy S. Brady, ed., NBER, 1966; World Bank data; Mack Ott, The growing
share of services in the US economydegeneration or evolution? Federal Reserve Bank of St. Louis Review,
June/July 1987.
89
101
102
5. An engine of productivity
Artificial intelligence, automation, and the economy, Executive Office of the President,
December 2016.
103
Exhibit 34
Employment in agriculture has fallen from 40 percent in 1900 to less than 2 percent today
Distribution of labor share by sector in the United States, 18402010
%
90
80
70
60
50
40
30
20
Manufacturing
10
0
1840 50
Agriculture
60
70
80
90 1900 10
20
30
40
50
60
70
80
90 2000 2010
SOURCE: Stanley Lebergott, Labor force and employment 18001960, in Output, employment, and productivity in the United States after 1800, Dorothy S.
Brady, ed., NBER, 1966; World Data Bank, World Bank Group; FRED: Economic Research, Federal Reserve Bank of St. Louis; Mack Ott, The
growing share of services in the US economydegeneration or evolution? Federal Reserve Bank of St. Louis Review, June/July 1987; McKinsey
Global Institute analysis
The world at work: Jobs, pay, and skills for 3.5billion people, McKinsey Global Institute, June 2012.
94
104
5. An engine of productivity
Automation could help change that scenario. Countries experiencing population declines
or stagnation will be able to make use of it to help maintain living standards even as the
labor force wanes. Meanwhile, countries with high birthrates and a significant growth in
the working-age population may have to worry about where new jobs will come from in a
new machine age. This is especially the case for high-income and low-growth countries,
including some in the Middle East.
The stakes are high because of the sheer numbers of people who have lifted their living
standards as a result of countries following the classic developmental pathand the millions
more who still hope to do so. In India, the impact of automation on employment could affect
working hours of the equivalent of 220million people; in China, that rises to 380million fulltime equivalents.
Chinese companies still have low levels of automation overall, although they are moving to
ramp up. There are only 36 robots per 10,000 Chinese manufacturing workers, about half
the average of all advanced economies and about one-fifth the US level.95 Auto factories
are less than 30percent as automated as US plants, and food processing is only about
12percent as automated as US food processing.96 This gap reflects the cost of Chinese
manufacturing labor, which has risen but remains low by the standards of advanced
economies. The average manufacturing worker makes about 10percent of the average US
manufacturing wage, for example. Our research finds that most Chinese manufacturers
are not yet able to realize the maximal value from robots due to a production process that is
less than optimal. Chinese companies may adopt a hybrid model that mixes the speed and
precision of automation with the flexibility of human labor.
The China effect on global innovation, McKinsey Global institute, October 2015.
Ibid.
97
Global growth: Can productivity save the day in an aging world? McKinsey Global Institute, January 2015.
98
Dani Rodrik, Premature deindustrialization, NBER working paper number 20935, February 2015.
95
96
105
As we have seen, the type of activities most susceptible to automation includes physical
activity or operating machinery in a predictable settingin other words, highly routine
work. A number of occupations in manufacturing sectors that use low-cost labor fit into this
category, such as sewing machine operators, who have a 98percent automation potential.
Agriculture, too, has a high automation potential because much of its activity is both physical
and predictable, and thus replaceable by machines. The speed of adoption of automated
technology depends in part on the size of the firms. For example, in India, where much
farming is on a small-scale family subsistence model, changing to larger-sized farms would
sharply raise the automation potential.
For advanced economies that have lost manufacturing jobs over the past decades because
of competition from lower-cost labor and the buildup of supply chains elsewhere, the drive
to automation may end or even reverse the outflow. The wage gap between advanced
and emerging economies is wider in manufacturing than for other sectors. At the same
time, companies in advanced economies often have a greater ability to fund the capital
expenditure that is needed to build highly automated manufacturing plants.
That does not mean jobs will flow back in large numbers, since only a very small part of
manufacturing value added is driven by labor cost, and any re-onshoring that does take
place will likely happen in highly automated plants. Moreover, for companies in advanced
economies, the business case for automation is not simple: hardware and software can
be costly, and integrating them successfully is laborious. But machines also have some
clear advantages: they can run continuously and do not require large human resources
departments. Operations are easier to manage if they are next door, which makes oversight
and shipping easier than if operations were halfway around the world. Politically and from a
public relations standpoint, too, it can be advantageous to be seen as a local stalwart.
106
5. An engine of productivity
Automation can quickly become a new engine for the global economy at a time when the
working-age population in numerous countries is stagnant or falling and productivity growth
is struggling to compensate. Whatever their economic structure, wage levels, growth
aspirations, or demographic trends, countries around the world could benefit from adopting
automation to maintain living standards and help meet long-term growth aspirations. The
rapid development and growing adoption of automation technologies will create myriad
new opportunities even as they likely disrupt the world of work and challenge long-held
conventions about the global economy and paths to prosperity. In order to make the most
of the potential offered by automation and, at the same time, manage its consequences on
companies, national economies, and workers around the world, policy makers, business
leaders, and men and women everywhere will need to think through the implications that
these new technologies will bring and prepare for significant changes. In our final chapter,
we discuss how stakeholders around the world can position themselves to benefit fully from
automations potential while avoiding its pitfalls.
Digital globalization: The new era of global flows, McKinsey Global Institute, February 2016.
Ibid.
101
Playing to win: The new global competition for corporate profits, McKinsey Global Institute, September 2015.
99
100
107
5. An engine of productivity
110
Michael Chui and James Manyika, Competing at the digital edge: Hyperscale businesses, McKinsey
Quarterly, March 2015.
human manager per 1,000 drivers compared with a typical limousine company that has
about one manager per 20 to 30 drivers. However, greater scale and speed also means that
the effects of negative changes are amplified. And these are not the only challenges that
automation could bring to businesses. From a technology standpoint, as software and data
underlie nearly all new automation technologies, cybersecurity issues become more critical
than ever.
Strategically, automation can also heighten competition, enabling startups or firms
from other sectors to encroach on new turf and exacerbating a growing divide between
technological leaders and laggards in every sector.107 At the same time automation can
support increasing scale, it also can provide the leverage that enables smaller companies
to compete with much larger firms. When the basis of competition using automation is
algorithms and data, the raw materials of competition are more readily accessible, through
the cloud and open data. For example, we have seen the advent of new competitors in the
media and game sectors deploying automation tools to quickly gain the reach of much more
established players.
The fact that automation displaces human work activities creates a set of real challenges for
companies that deploy it. Worker displacement creates the potential for labor unrest, and
the size and scope of retraining/placement programs, whether put in place by companies or
others, will have to mirror the size and scope of automation programs. The effective use of
automation requires the transformation of processes, changing what people do, even those
that are not made redundant by automation. In general, workflows will change, and new
roles will emerge, such as that of robot trainer or exception handler.
107
111
continue to evolve. Others will have to be redeployed, potentially to other positions in the
economy, and businesses have a role to play in aiding these transitions. This will require
not only changes in skills, but also changes in mindsets and culture, in a world where
work activities continue to change, and co-workers include not only other people, but
also machines.
Tim OReilly, Dont replace people. Augment them, Medium.com, July 17, 2016.
Technology and the American economy: Report of the National Commission on Technology, Automation, and
Economic Progress, US Department of Health, Education, and Welfare, 1966.
108
109
112
While policy-makers might not be able to predict the new activities and occupations that can
be created, they can help create the conditions under which innovation in the use of human
labor becomes more likely. Governments could also encourage new forms of technologyenabled entrepreneurship. Digital technology itself can enable new forms of entrepreneurial
activity. Workers in small businesses and self-employed occupations can benefit from
higher income earning opportunities. A new category of knowledge-enabled jobs will
become possible as machines embed intelligence and knowledge that low-skill workers
can access with a little training. In India, for example, Google is rolling out the internet Saathi
(friends of the internet) program in which rural women are trained to use the internet and
then become local agents who provide services in their villages through internet-enabled
devices. The services include working as local distributors for telecom products (phones,
SIM cards, and data packs), field data collectors for research agencies, financial-service
agents, and para-technicians who help local people access government schemes and
benefits through an internet-based device. There is a need for these services in rural India
where broad internet reach and digital literacy are still low, but where an increasing number
of services are being provided online. Googles program aims to create more than 50,000
internet Saathis who will provide services to more than 50million households in rural India.110
Indias technology opportunity: Transforming lives, empowering people, McKinsey Global Institute,
December 2014.
111
Poorer than their parents? Flat or falling incomes in advanced economies, McKinsey Global Institute,
July 2016.
112
David Autor, Skills, education, and the rise of earnings inequality among the other 99percent, Science,
volume 344, issue 6186, May 2014. See also Poorer than their parents? Flat or falling incomes in advanced
economies, McKinsey Global Institute, July 2016.
113
Artificial intelligence, automation, and the economy, Executive Office of the President, December 2016.
114
The age of analytics: Competing in a data-driven world, McKinsey Global Institute, December 2016
110
113
are filled, with new education and training possibilities established rapidly and prioritized.
They could also foster the growth of technology-enabled solutions for the labor market that
improve matching and access to jobs, such as online talent platforms.115 As automation
reshapes the workplace, independent work could become increasingly important, and
policy makers will want to address issues such as benefits and variability that these
platforms can raise.
Furthermore, while important work that needs doing might be identified, there is a possibility
of market failures in the wages that might be paid for that work, a situation for which public
policy interventions might be appropriate.
A labor market that works: Connecting talent with opportunity in the digital age, McKinsey Global Institute,
June 2015.
116
Erik Brynjolfsson and Andrew McAfee, The second machine age: Work, progress, and prosperity in a time of
brilliant technologies, W. W. Norton & Company, 2014.
117
Ibid.
115
114
Education systems will need to evolve for a changed workplace, with policy makers working
with education providers to improve basic skills, with a new emphasis on topics such as
creativity, emotional intelligence, and leading and coaching others. For all, developing agility,
resilience, and flexibility will be important at a time when everybodys job is likely to change
to some degree.
Finally, automation will create an opportunity for those in work to make use of the innate
human skills that machines have the hardest time replicating: social and emotional
capabilities, providing expertise, coaching and developing others, and creativity. For
now, the world of work still expects men and women to undertake rote tasks that do not
stretch these innate capabilities as far as they could. As machines take on ever more of the
predictable activities of the workday, these skills will be at a premium. Automation could
make us all more human.
See, A labor market that works: Connecting talent with opportunity in the digital age, McKinsey Global Institute, October 2016; Independent
work: Choice, necessity and the gig economy, McKinsey Global Institute, October 2016; and The world at work: Jobs, pay and skills for
3.5billion people, McKinsey Global Institute, October June 2012.
2
See for example, Charles Murray, A guaranteed income for every American, Wall Street Journal, June 3, 2016. Among business leaders, Elon
Musk has spoken out in favor of such a program.
3
Swiss voters reject proposal to give basic income to every adult and child, Guardian, June 5, 2016.
4
Preparations for the basic income experiment continue, Kela, December 14, 2016. In the 1970s, Canada launched a five-year experiment in
guaranteed basic income, known as Mincome, in Dauphin, Manitoba. The poverty level decreased, hospitalization rates fell, and high school
completion rates rose. The drawback was that non-primary income earners (often mothers of small children) dropped out of the labor force.
See Evelyn L. Forget, The town with no poverty: A history of the North American guaranteed annual income social experiments, University of
Manitoba, May 2008.
5
US Internal Revenue Service.
1
115
Considerable uncertainties surround the advent of the automation eraand have done
so for years. A half century ago, a US commission on technology, automation, and
economic progress wrestled with some of the same questions about the future of work and
employment that we do in this report.118 The speed with which automation will be adopted
into the workplace will vary, and the effects on employment, on national economies, and
on businesses and workers globally will play out in myriad ways. At its core, however,
automation represents a considerable opportunity for the global economy at a time of weak
productivity and a declining share of the working-age population. For corporate leaders,
too, automation will reshape the business landscape and create considerable future value.
How to capture the opportunities and prepare for the possible consequences will be a key
political, economic, corporate, and social question going forward. This is not something
that can be watched from the sidelines. Automation is already here, and the technological
advances continue. It is never too early to prepare.
Technology and the American economy: Report of the National Commission on Technology, Automation, and
Economic Progress, US Department of Health, Education, and Welfare, 1966.
118
116
In 2016 a computer beat the human world champion at the game of Go.
Steve McAlister/Getty Images
118
TECHNICAL APPENDIX
This appendix outlines key points on the methodology in the following sections:
1. Assessment of technical potential for automation
2. Modeling of automation adoption timelines
3. Economic modeling
4. Key proxies and data sources
Exhibit A1
Criteria for automation: Accept input
Score (based on tech advancements and complexity)
Requirement:
Basic to
execute task
Automation
capability
Requirement:
High human (top
quartile of global
labor pool)
Metric to define
continuum
Natural
language
understanding
Low language
comprehension
required (while still
accurate with
structured
commands)
Moderate language
comprehension
(medium accuracy
of nuanced
conversation)
High language
comprehension
and accuracy,
including nuanced
human interaction
and some quasi
language
Accuracy of
comprehension
Complexity of
language/
context/
integration
Sensory
perception
Autonomously
infers more
complex external
perception using
sensors (e.g., high
resolution detail,
videos) and simple
integration using
inference
High human-like
perception
(including ability to
infer and integrate
holistic external
perception)
Accuracy of
perception/
complexity of
scene
Degree of
integration
across sensors
Social and
emotional
sensing
Comprehensive
social and
emotional sensing
(e.g., voice, facial
and gesture
recognition-based
social and
emotional sensing)
Quality of
comprehension
120
Automation
Technical appendix
Exhibit A2
Criteria for automation: Information processing
Score (based on tech advancements and complexity)
Requirement:
Basic to
execute task
Automation
capability
Requirement:
High human (top
quartile of global
labor pool)
Metric to define
continuum
Recognizing
Does not require
known patterns/ pattern/category
category
recognition
(supervised
learning)
Recognition of
basic known
patterns/categories
(e.g., lookup
functions in data
modeling)
Recognition of
more complex
known patterns/
categories
High human-like
recognition
of known patterns
Complexity of
pattern
Generation of
novel patterns/
categories
Simple/basic ability
for
pattern/category
generation
More advanced
capacity for
recognition of new
patterns/categories
and unsupervised
learning
High human-like
recognition of new
patterns/
categories,
including
development of
novel hypotheses
Complexity of
pattern
Logical
Does not require
reasoning/
contextual
problem solving knowledge or
interpretation of
novel inputs
Capable of
problem solving
based on
contextual
information in
limited knowledge
domains with
simple
combinations of
inputs
Capable of
problem solving in
many contextual
domains with
moderately
complex inputs
Capable of
extensive
contextual
reasoning and
handling multiple
complex, possibly
conflicting, inputs
Complexity of
context and
inputs
Optimization
and planning
Simple
optimization (e.g.,
optimization of
linear constraints)
More complex
optimization (e.g.,
product mix to
maximize
profitability, with
constraint on
demand and
supply)
High human-like
optimization and
planning based on
judgment (e.g.,
staffing a working
team based on
team/individual
goals)
Degree of
optimization
(single vs. multi
variate)
Creativity
Some similarity to
existing
ideas/concepts
Low similarity to
existing
ideas/concepts
No similarity to
existing
ideas/concepts
Novelty/
originality and
diversity of ideas
Information
retrieval
Search across
limited set of
sources (e.g.,
ordering parts)
Search across
multiple set of
diverse sources
(e.g., advising
students)
Expansive search
across
comprehensive
sources (e.g.,
writing research
reports)
Scale (breadth,
depth, and
degree of
integration) of
sources
Speed of
retrieval
Coordination
with multiple
agents
Limited group
collaboration; low
level of interaction
Regular group
interaction
requiring real-time
collaboration
Complex group
interaction
requiring high
human like
collaboration
Complexity of
coordination
(i.e., number of
interactions per
decision)
Speed/frequency
of coordination
Social and
emotional
reasoning
More advanced
social and
emotional
reasoning
High human-like
social and
emotional
reasoning
Complexity of
emotional
inference
121
Exhibit A3
Criteria for automation: Deliver output
Score (based on tech advancements and complexity)
Requirement:
Basic to
execute task
Requirement:
High human (top
quartile of global
labor pool)
Automation
capability
Output
articulation/
display
Articulation of
simple content
(e.g., organizing
existing content)
Articulation of
moderately
complex content
High human-like
articulation
Complexity of
message
delivered
Variability in
medium of
message
delivered
Natural
language
generation
Nuanced, high
human-like
language output
Complexity of
message
delivered.
Note: includes
use of quasi
linguistics
(idioms, common
names, etc.)
Accuracy of
audience
interpretation
Emotional and
social output
Advanced social
and emotional
discussions (e.g.,
conversations with
gestures)
Nuanced high
human-like body
language and
emotional display
Complexity of
emotional
communication
Accuracy of
audience
interpretation
122
Technical appendix
Metric to define
continuum
Exhibit A4
Criteria for automation: Physical movement
Score (based on tech advancements and complexity)
Requirement:
Basic to
execute task
Requirement:
High human (top
quartile of global
labor pool)
Automation
capability
Metric to define
continuum
Fine motor
skills/dexterity
Ability to handle
and manipulate
common simple
objects (e.g., large
solid objects) using
sensory data
High human
dexterity and
coordination
Precision,
sensitivity, and
dexterity of
manipulation
Gross motor
skills
More advanced
multi-dimensional
motor skills
Range and
degree of motion
Speed and
strength of
motion
Navigation
Use pre-defined
algorithm for
mapping and
navigation
Autonomous
mapping and
navigation in
simple
environment
Autonomous
mapping and
navigation in
complex
environment
Complexity of
environment
(while still
maintaining
accuracy)
Mobility
Mobility/locomotion
in simple
environment
(e.g., limited
obstacles/office
space)
Speed (gross
motor) of
mobility
Scale of mobility
(2D vs. 3D)
Complexity of
environment/
terrain
123
Solution development
To estimate how long it would take to develop a solution that could integrate automation
technologies after the establishment of technical feasibility, we used a three-step process.
First, to understand the solution development life cycle, we collected the development time
and technical capabilities for more than 100 previously developed automation solutions,
including both hardware and software solutions. We recorded the number of years from
initial research to development (product launch) as well as up to three of the most relevant
capabilities for each.
Second, we generated solution development scenarios, taking the 25th and 75th percentile
development time for each of the 18 capabilities across all of its associated solutions.
Third, we estimated the solution development time for a given work activity based on the
maximum solution development time of capabilities that activity required. Several examples
are assessed to ensure accuracy, and we assign 25th and 75th percentile to the earliest/
latest scenario correspondingly.
Economic feasibility
Once a solution is developed, we assume the activities will start to be automated after the
cost of the solution falls below the level of wages for that activity. For this calculation, we took
into account both the evolution of solution costs and the evolution of wages.
124
Technical appendix
Wage evolution
We model the wage evolution for each country in two stages. From today until 2030, we
apply country-level growth estimates for all countries. The McKinsey Global Growth Model
provides wage data to 2030 for G20 countries and other major regions. We use best proxy
to estimate the remaining 26 countries not covered by the McKinsey model. As the data
are in local currency, we convert it into 2010 constant US dollars, by dividing nominal GDP
by corresponding country-level consumer prices (2010 base) and times the exchange rate
to the dollar (2010 base). We then calculated a compound annual growth rate (CAGR) for
each country. For 2030 onward, we group the 46 countries for which we have data into two
cohorts using a cutoff country-level annual wage, based on the wage distribution from 2016
to 2030. Countries within the same cohort grow at same rate. The cohort-level wage growth
rate is then estimated using the CAGR from 2016 to 2030 of the corresponding G20 country
within the cohort. The cutoff level also evolves at 2.66percent annually, which is the median
G20 CAGR between 2016 and 2030. We reclassify countries each year. As a country
advances into the next cohort, the appropriate growth rate will be applied. The detailed
proxy assignment and grouping is listed in ExhibitA5.
125
Exhibit A5
We approximate 26 countries with proper proxy till 2030 and classify them into two cohorts with group-level growth
rate for 2030 onward
McKinsey Global Growth Model (GGM) prediction and
proxy
GGM provides country-level growth rate for G19 + Spain
Other developed
East Asia and Pacific
Singapore
Other South Asia
Malaysia
Philippines
Thailand
Other Latin America
and Caribbean
Barbados
Chile
Colombia
Costa Rica
Peru
Other Eastern
Europe and Central
Asia
Poland
Other PIIGS
Greece
Cohort growth
Australia
Austria
Bahrain
Canada
France
Germany
Greece
Italy
Japan
Kuwait
Netherlands
Norway
Qatar
Saudi Arabia
Singapore
South Korea
Spain
Sweden
Switzerland
United Arab
Emirates
United
Kingdom
United States
Argentina
Barbados
Brazil
Chile
China
Colombia
Costa Rica
Czech Republic
Egypt
India
Indonesia
Kenya
Malaysia
Mexico
Morocco
Nigeria
Oman
Peru
Philippines
Poland
Russia
South Africa
Thailand
Turkey
126
Technical appendix
Equations
To incorporate all these factors, we use the mathematics of the Bass diffusion model, a
well-known and widely used function in forecasting, especially for new products sales
forecasting and technology forecasting.
()
= +
1 ()
Where F(t) is the installed base fraction (that is, adoption of given technology or product)
and f(t) is the corresponding rate of change.
The function in our case also contains
two
key parameters:
q parameter
values from
meta-analyses can be
regression. In the absence
of data, p and
used if saturation value is known or can be guessed.
Exhibit A8
We then simulate two scenarios for known historic technology adoption curves (see
Exhibit21 in the main report). The technologies we used are stents, airbags, laparoscopic
surgery, MRI,
smartphones, TVs,
antilock braking systems, online air booking, cellphones,
19+
color TVs, SxEW leaching (copper), personal computers, electronic stability control,
19+
instrument landing systems,
dishwashers,
pacemakers.
The fitted values of parameters
and
119
p and q are consistent with other academic research. It takes about five years to
reach 50percent adoption in the earliest scenario and approximately 16years in the
latest scenario.
Equations
3. ECONOMIC MODELING
To better understand the economic implication of automation, we examine it at both the
global and country levels. Key assumptions are similar across the two levels. The global level
is essentially an aggregated version of major countries including the G19 and Nigeria.
Our analysis is based on three primary components at country level: projected number of
full-time equivalents (FTE), the number
() of full-time employees needed to maintain GDP per
capita and achieve GDP per capita projection,
= and
+automation
output.
1 ()
=
19+
19+
Based on an empirical generalization from 218 technologies. See Fareena Sultan, John U. Farley, and Donald
R. Lehmann, Reflections on A meta-analysis of applications of diffusion models, Journal of Marketing
Research, volume 33, number 2, May 1996; time periods are annual.
119
127
We modeled different segments: ages 014, ages 1524, ages 2464 female, ages 2464
male, and ages 65-plus. For each segment we gathered data on:
Population: Our model uses the United Nations projection on population to 2065.
Labor participation rate: We use historical data from the International Labour
Organisation to 2012. We estimate future participation conservatively, taking the highest
rate between 2007 and 2012 and fixing it for the future for each segment. For the
participation rate of the 014 age segment, we assume it will remain the same as in 2012.
Unemployment rate: We again use data from the ILO and assume it will be at the longterm steady state average moving forward.
128
Technical appendix
at the
= global level. The only
difference is that we average key indicators such as global growth based on averaged GDP,
population, and participation rate as well as unemployment rate across G19 plus Nigeria.
We make an adjusted
calculation
for the number
of FTE
at a global
level. Given the nature
of FTE, it must be aggregated with adjustments based on corresponding country-level
productivity. We essentially recalculate the global level average productivity using countrylevel data as follows:
19+
19+
The global level averaged productivity is then divided by global-level GDP to calculate
corresponding number of FTE. Without this adjustment, the number of FTE needed to
maintain GDP growth will be inflated given difference on productivity across countries.
Exhibit A6
Our approach to model design and estimating impact of automation
Database structure
Impact definition
Country
Industry
Impact by
job title
($ per year)
Number
of FTEs
Annual wage
($)
Impact by
activity
($ per year)
Number
of FTEs1
Time spent on
activity per year
(hours)
Impact by
industry
= Job title
Job title
Activity
Ease of automation
(high, medium, low)
Time per year spent
(hours)
Number
of FTEs
Average
hourly wage
($)
Annual wage
($)
129
Exhibit A7
We converted frequency to number of hours using best fitting curve and validated it with job description
based on our case studies
Cashier example
Time spent on activity
Hours per year
200
y = kx3.89
150
100
50
0.2
0
3.4
Activity repeats
annually or more
3.6
3.8
4.0
4.2
4.4
4.6
Frequency score
SOURCE: US Bureau of Labor Statistics; McKinsey Global Institute analysis
130
Technical appendix
4.8
5.0
5.2
5.4
5.6
5.8
6.0
6.2
131
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Cover image Oli Scarff/Staff/Getty Images News.
Contents page images: Go board Steve McAlister/Getty Images; high-tech
supermarket Birgit Reichert/dpa Picture-Alliance/Alamy Stock Photo;
man and robot Javier Larrea/age fotostock/Getty Images.